n s a 2003, - Packages Limited€¦ · agricultural by-products i.e. wheat straw and river grass....

an illustration denoting tHe timeless elegance of suraj miani saHib in multan. created by mavra almas, 2005

naqsH scHool of arts was establisHed by tHe babar ali

foundation in 2003, witH tHe purpose to revive tHe traditional

arts of miniature, naqasHi (tHe art of arabesques) and

calligrapHy.

naqsH artists and students Have excelled in tHe art of naqasHi,

wHicH Has been inspired from tHe ricH Historical monuments of

tHe mugHal era.

packages limited is proud to Have been a patron of naqsH over

tHe years. we are Happy to dedicate tHe tHeme of tHis year’s

annual report to tHe revival of traditional naqasHi, using some

of tHe artworks produced by tHe naqsH scHool of arts.

on tHe cover page: a magnificent display of true arabesque patterns coming to life

– a masterpiece inspired by jaHangir’s tomb in laHore.created by afsHan ijaz, n.d.

Annual Report of Packages Limited 2012

OttOman majestytHe strikingly intricate beauty of a 16tH century ceiling artwork.a spectacularly intricate painting depicting tHe mausoleum of sHaH rukn-e-alam in multan.created by sadia jamil, 2012

2

contents

04 Company Profile

06 Company Information

08 Organogram

10 Business Divisions

21 Entity Rating

Governance

22 Board of Directors

24 Management Committees

26 Vision, Mission and Policies

30 Core Values

31 Code of Conduct

Stakeholders’ Information

32 Decade at a Glance

34 Horizontal and Vertical Analysis

38 Value Added and its Distribution

39 Sources and Application of Funds

40 Corporate Calendar

42 Corporate Social Responsibility

Shareholders’ Information

46 Notice of Annual General Meeting

48 Directors’ Report to the Shareholders

58 Shareholders’ Information

Financial Statements

65 Statement of Compliance with the Code of

Corporate Governance

67 Review Report on Statement of Compliance

with Best Practices of Code of Corporate

Governance

68 Auditors’ Report to the Members

69 Financial Statements

Consolidated Financial Statements

123 Directors’ Report on the Consolidated

Financial Statements

125 Auditors’ Report to the Members

126 Consolidated Financial Statements

Proxy Form

183 Form of Proxy


3

company profile

Historical overviewPackages Limited was established in

1957 as a joint venture between the

Ali Group of Pakistan and Akerlund &

Rausing of Sweden, to convert paper

and paperboard into packaging for

consumer industry. Over the years,

Packages has continued to enhance

its facilities to meet the growing

demand of packaging products.

In 1968, with IFC participation,

Packages integrated upstream by

establishing a pulp and paper mill

with a capacity of 24,000 tons per

year based on waste paper and

agricultural by-products i.e. wheat

straw and river grass. With growing

demand, the capacity was increased

periodically and in January 2003 total

capacity was nearly 100,000 tons per

year.

In 1982, Packages modified a paper

machine to produce tissue paper in

response to growing awareness and

demand for hygienic and disposable

tissues. The “Rose Petal” Brand name

was launched with facial tissues and

was later expanded to include toilet

paper, kitchen roll, and table napkins.

In 1986, the Company established a

flexible packaging unit to cater to the

increasing demand from consumers

for sophisticated packaging used

primarily in the food industry.

In 1993, a joint venture agreement

was signed with Mitsubishi

Corporation of Japan for the

manufacture of Polypropylene films

at the Industrial Estate in Hattar,

Khyber Pakhtunkhwa. This project,

Tri-Pack Films Limited, commenced

production in June 1995 with equity

participation by Packages Limited,

Mitsubishi Corporation, Altawfeek

Company for Investment Funds,

Saudi Arabia and general public.

Packages Limited owns 33% of Tri-

Pack Films Limited’s equity.

In July 1994, Coates Lorilleux Pakistan

Limited (currently DIC Pakistan

Limited) in which Packages Limited

has 55% ownership, commenced

production and sale of printing inks.

During the same year, the Company

initiated the capacity expansion of

its Paper and Board mill to 65,000

tons per year and conversion capacity

to 56,000 tons per year. At the same

time, the Company also upgraded

the quality of Packages’ products

and substantially improved pollution

control to meet the World Bank

environmental guidelines. The said

expansion was completed in 1998 at a

cost of PKR 2.7 billion.

In 1996, Packages Limited entered

into a joint venture agreement with

Printcare (Ceylon) Limited for the

production of flexible packaging

materials in Sri Lanka. Packages

Lanka (Private) Limited, in which

Packages Limited has 79% ownership,

commenced production in 1998.

In 2000, Packages successfully

completed the expansion of the

flexible packaging line by installing

a new rotogravure printing machine

and enhancing the carton line by

putting up a new Lemanic rotogravure

in-line printing and cutting creasing

machine. In addition, a new 8 Color

Flexo Graphic Printing Machine was

also installed in the Business Unit

Flexible Packaging in 2001.

Packages started producing

corrugated boxes from its plant in

Karachi from 2002.

In 2005, the Company embarked upon

its Paper & Board expansion plan at

a new site (Bulleh Shah Paper Mill,

Kasur), almost tripling its capacity

from the current 100,000 tons per

annum to 300,000 tons per annum.

Capacity expansion at Bulleh Shah

Paper Mill was completed in two

phases. In the first phase, Brown

Board Machine PM-6 alongwith high

yield straw pulping & OCC plants

and its back processes such as 11

MW Power House, Gas Turbine and

Primary Effluent Treatment Plant

were capitalized and commercial

4

operations were commenced

during the year 2007. Second phase

comprising of Writing and Printing

Paper Machine PM-7, De-inking Pulp

Plant, 41MW Power House, Steam

Turbine and Secondary Effluent

Treatment Plant was completed in the

year 2009.

In 2008, the Company embarked upon

capacity expansion in its Consumer

Products Division through installation

of a new tissue paper manufacturing

machine PM-9 with production

capacity of 33,000 tons per year.

With this capacity expansion, the

Company is now in a position to take

benefit from export potential of tissue

products in the international market,

particularly the Middle East.

During 2011, a lamination machine

was installed in the Business Unit

Flexible Packaging. This is Pakistan’s

first high speed Solvent-less

Automatic Lamination Machine. It

has turret winders for automatic reel

and a capacity of 450 meters per

minute.

Paper Machine PM-6 rebuild project

was also completed during 2011

leading to capacity expansion of

30,000 tons per year. The machine

started commercial operations with

enhanced capability of producing

high value added liquid packaging

and bleached board.

Moreover, the Corrugator Machine

at Kasur Plant was upgraded in 2011

to improve efficiency, reliability,

enhance capacity and reduce waste.

This upgrade activity has resulted in

increased capacity of 14%.

year 2012To enable continuous growth and

technical development in the Paper

& Paperboard segment, the Board of

Directors of Packages Limited have

signed an agreement on September

17, 2012 with “Stora Enso OYJ Group”

(Stora Enso) of Finland entering

into 50/50 Joint Venture in its 100%

wholly owned subsidiary “Bulleh

Shah Packaging (Private) Limited”

[formerly “Bulleh Shah Paper Mill

(Private) Limited”] (‘BSPL’). This Joint

Venture Agreement would enable

greater focus on Paper & Paperboard

and Corrugated businesses which are

integrally linked and have specific

capital and technology requirements.

As part of its efforts to remain

abreast with improved technological

developments in the Packaging

business, the Company has invested

in a New Rotogravure Machine for

its Flexible Packaging Business with

total estimated project cost of Rs. 326

million.

an exquisitely ornate painting representing tHe Historic sHrine of sHaH sHams tabrez in multan. created by naseem amir & noureen rasHeed, 2005


5

emerald nObilitya dazzling combination of geometric and arabesque motifs adorning an ancient wall.

company information

a floral decorated panel sHowcasing tHe solemn beauty of jaHangir’s tomb in laHore.created by sadta kHalid, 2012

6

Board of Directors

Towfiq Habib Chinoy (Chairman)(Non - Executive Director)

Syed Hyder Ali (Chief Executive & Managing Director)(Executive Director)

Khalid Yacob (Executive Director)

Mats Nordlander(Non - Executive Director)

Muhammad Aurangzeb (Independent Director)

Shahid Aziz Siddiqui (Independent Director)

Shamim Ahmad Khan (Non - Executive Director)

Syed Aslam Mehdi (Executive Director)

Syed Shahid Ali (Non - Executive Director)

Wazir Ali Khoja (Independent Director)

Advisor

Syed Babar Ali

Company Secretary

Adi J. Cawasji

Rating Agency

PACRA

Company Credit Rating

Long-Term : AA

Short-Term : A1+

Auditors

A.F. Ferguson & Co.Chartered Accountants

Legal Advisors

Hassan & Hassan - Lahore

Orr, Dignam & Co. - Karachi

Shares Registrar

FAMCO Associates (Pvt.) Limited

1st Floor, State Life Building No. 1-A

I. I. Chundrigar Road, Karachi-74000,

Pakistan

PABX : (021) 32420755

: (021) 32427012

: (021) 32425467

Fax : (021) 32426752

Bankers & Lenders

Allied Bank Limited

Askari Bank Limited

Bank Alfalah Limited

Bank Al-Habib Limited

BankIslami Pakistan Limited

Barclays Bank PLC, Pakistan

Citibank N.A.

Deutsche Bank A.G.

Dubai Islamic Bank Pakistan Limited

Faysal Bank Limited

Habib Bank Limited

Habib Metropolitan Bank Limited

HSBC Bank Middle East Limited

International Finance Corporation (IFC)

JS Bank Limited

MCB Bank Limited

Meezan Bank Limited

National Bank of Pakistan

NIB Bank Limited

Samba Bank Limited

Silk Bank Limited

Soneri Bank Limited

Standard Chartered Bank (Pakistan)

Limited

The Bank of Punjab

The Bank of Tokyo - Mitsubishi UFJ,

Limited

United Bank Limited

Head Office & Works

Shahrah-e-Roomi,

P.O. Amer Sidhu,

Lahore - 54760, Pakistan

PABX : (042) 35811541-46

: (042) 35811191-94

Fax : (042) 35811195

: (042) 35820147

Kasur Factory

10-km Kasur Kot Radha Kishan Road,

District Kasur, Pakistan

Tel : (049) 2717335 - 43

Fax : (049) 2717220

Karachi Factory

Plot No. 6 & 6/1, Sector 28,

Korangi Industrial Area,

Karachi-74900, Pakistan

Tel : (021) 35045320, 35045310

Fax : (021) 35045330

Registered Office & Regional Sales Office

4th Floor, The Forum

Suite No. 416 - 422, G-20, Block 9,

Khayaban-e-Jami, Clifton,

Karachi-75600, Pakistan

PABX : (021) 35874047-49

: (021) 35378650-52

: (021) 35831618, 35833011

Fax : (021) 35860251

Regional Sales Office

2nd Floor, G.D. Arcade

73-E, Fazal-ul-Haq Road, Blue Area,

Islamabad-44000, Pakistan

PABX : (051) 2276765

: (051) 2276768

: (051) 2278632

Fax : (051) 2829411

Zonal Sales Offices

C-2, Hassan Arcade Nusrat Road,

Multan Cantt. - 60000, Pakistan

Tel & Fax: (061) 4504553

9th Floor State Life Building,

2-Liaquat Road,

Faisalabad - Pakistan

Tel : (041) 2540842

Fax : (041) 2540815

Web Presence

www.packages.com.pk


7

mOrOccan resplendence a labyrintH of complex geometric patterns tHat are intriguing to tHe eye.

organogram

an intriguing composition of vibrant colors and elaborate motifs – inspired by tHe wazir kHan mosque in laHore. created by fakHra rasHid, 2010

8

Board of Directors

ExecutiveCommittee

AuditCommittee

Human Resource & Remuneration Committee

System & TechnologyCommittee

Business StrategyCommittee

Managing Director

General Manager

Operations Establishment / Service Functions

Paper & Paperboard Administration

Folding Cartons Finance

Flexible Packaging

IndustrialRelations

CorrugatedBoxes

EnterpriseResource Planning

Consumer Products

Quality Assurance

Roll Cover & Mechanical Fabrication

Human ResourceDevelopment

Marketing &Sales

CustomerServices

SupplyManagement

Power Services

Research &Development

Medical

IndustrialPerformance

Paper & Paperboard and Corrugated Boxes businesses will be transferred to Bulleh Shah Packaging (Private) Limited [Formerly Bulleh Shah Paper Mill (Private) Limited] during 2013 as a result of joint venture agreement signed between Packages Limited and Stora Enso OYJ Group.


9

business divisions

In 1968, Packages established a pulp

and paper mill with a capacity of

24,000 tons per year.

Paper and board production capacity

increased to 100,000 tons per year by

2003.

Packages enhanced its production

capacity to 300,000 tons per annum

by investing in a cutting edge new

paper & board mill “Bulleh Shah

Paper Mill” near Kasur in two phases.

The first phase was completed in 2007

through installation of Paper and

Board Machine (PM-6) whereas the

second Phase was completed in 2009

with the installation of Writing and

Printing Paper Machine (PM-7).

Paper Machine (PM-6) was rebuilt in

the second quarter of 2011 leading

to capacity expansion of 30,000 tons

per year.

Major Production Lines

Paper and Paperboard Division

comprises of the following major

machines:

• PaperandBoardMachine(PM-6)

• PaperMachine(PM-7)

• OfflineCoatingMachine

• CoreMakingMachine

Brands

Photocopy paper is available in

market under the brand name of

“Copymate Plus” that is a premium

quality wood pulp paper.

Liquid PackagingBoard

Key products

Liner and Fluting Paper

White DuplexBoard

White BleachedBoard

MF Offset Paper

White Card Board

PhotocopyingPaper

Writing & PrintingPaper

paper & paperboard division

Paper & Paperboard business will be transferred to Bulleh Shah Packaging (Private) Limited [Formerly Bulleh Shah Paper Mill (Private) Limited] during 2013 as a result of joint venture agreement signed between Packages Limited and Stora Enso OYJ Group

Management Structure

Business Unit Manager

• MarketingManager

• MillManager

• ProductionManager

• LineManager(PM-6)

• LineManager(PM-7)

• ManagerCoating

• MillServicesManager

10

process flow of paper & paperboard division

Raw Materials Wheat straw

Pulping

Screening

Refining

Cleaning &Thickening

Processes

OCC

Slushing

CoarseScreening

Fine Screening

Cleaning &Thickening

Wood pulp

Slushing

Refining

Paper Machine (PM-7)

Distributionand Direct Saleto Local Market

Writing &Printing Paper

LocalMarket and

Export

CorrugatorDivision

IndustrialCustomer

LocalMarket

PackagingDivision

Products

Customers

PhotocopyPaper

Paper Machine (PM-6)

FlutingLinerLiquid

PackagingBoard

WhiteBleached

Board

WhiteDuplexBoard

a dazzling composition of floriated motifs – inspired by tHe sHrine of baba bHuman sHaH in okara.created by nooHi ejaz, 2006


11

The tobacco carton manufacturing

has always been a unique feature

of Packages since its inception,

especially after installation of

Lemanic and Riveria DR-67 to

produce carton with in line printing,

embossing, rotary cutting & creasing

function. These are intelligent high

speed gravure lines with in-line

quality check and bundling. Quality

assurance is 100% with the register

automatically preset at standstill,

reducing waste and reaching

production conditions faster by

minimizing waste, maximizing up-

times, quick settings and production

speeds.

Offset printing

Offset printing is a commonly used

printing technique in which the inked

image is transferred (or “offset”) from

a plate to a rubber blanket, then to

the printing surface. It is the most

commonly used method today, and

has many advantages over other

forms of printing, especially when

we need high and consistent image

quality.

Business Unit has the most

sophisticated hardware from the

world leaders in the design and build

of sheet feed offset presses with

double coater option. With the latest

technology available in house, offset

printing produces sharp and clean

images with consistent high image

quality. It gives BUFC a competitive

edge from market to deliver quality

and meet the customer requirement

for high value jobs.

Die Making

BUFC has the most advanced and

reliable technology available for the

preparation of die. Packages is the

packaging divisionPackages provide multi dimensional

/ multi product packaging solutions

to its clients that are involved in

manufacturing consumer products.

The Packaging Division comprises

of three business units based on

packaging material categories

namely;

• FoldingCartons

• FlexiblePackaging

• CorrugatedBoxes

Folding CartonsWith over 55 years of experience in

providing reliable service and quality,

Business Unit Folding Cartons

provides a wide range of products

to tobacco, pharmaceutical, FMCG,

personal care and food industries.

With a strong backward integration,

state of the art hardware, in-house

press facilities, dedicated, qualified

and professionally trained manpower

is geared to provide high volumes,

consistent quality and value addition

at a competitive price.

Operations

Folding Carton line uses both state

of the art rotogravure and offset

printing technologies for printing and

conversion of folding cartons.

Rotogravure printing

The Rotogravure process is a type of

intaglio process in which the actual

image is etched into the surface of

metallic cylinder. The image consists

of tiny cells (or wells) engraved into

the cylinder. The print quality of

photographs using gravure is often

superior to other printing processes

and is preferred method when large

print runs are required.

only company in the country having

this facility available for its die

making requirements.

Conversion

For the conversion requirement of

printing material, Business Unit

has the top of the line hardware for

both cutting & creasing and gluing

operations. At cutting & creasing,

a fleet of high end die cutters are

available which provide finest

cutting & creasing quality. Moreover,

specialized machines gives best hot

foil stamping on cartons to cater

the value addition requirement of

customers.

Market Segmentation

The market’s increased focus on

product differentiation and attractive

packaging is driving demand for

our products. Business unit folding

carton works firmly to deliver the best

carton board products to support the

brand and packaging requirements

of customers as well as high value-

added packaging for:

• Pharmaceuticals

• Personalcare

• Tobacco

• Homecareproducts.



• PlanningManager


• ManagerOffsetPrinting

• ManagerCutting&

Creasing

• ManagerFolding&

Gluing

• ManagerRotogravure

Printing

• ManagerTechnical&

Support

12

Raw Material (Board and Inks)

Offset Printing RotogravurePrinting

Finished Product

PrintedWeb + Varnish

Embossing andCutting & Creasing

Real Time QualityCheck

Finished Product

Printing, Varnish, UltravioletVarnish, Flexo metallic

Cutting & Creasing,Embossing,

Hot Foil Stamping

Paper Cups Forming(Liquid & Ice Cream)

Folding & Gluing,Window Patching,

Flame Seal

Flexible Packaging To accommodate increasing demand

for sophisticated packaging, the

Company established a Flexible

Packaging Unit in 1986 at its Lahore

Plant.

Business Unit Flexible Packaging

(BUFP) provides a one stop packaging

solution by providing high quality

detailed graphics in Flexographic

and Rotogravure printing. BUFP also

provides lamination for plastic films,

aluminium foil, paper, multi-layer

blown film extrusion for high speed

technology in multi-lane slitting,

standalone spout inserted bags, poly-

bags, zipper-bags, sleeves and ice

cream-cones.

Environment – increasingly important

As a part of an environmental friendly

organization, BUFP is also working

on 4 R’s of packaging i.e. Reduce,

Re-use, Recycle and Recover. BUFP is

a responsible organization certified

for properly implementing Quality

Management System ISO 9000,

Environment Management System

ISO 14000 and hygiene Management

System HACCP.

Market Segmentation

We not only provide cost effective

and perfect packaging solutions to

our valuable customers; also we offer

them strong technical support on our

product. We have great in-house R&D

facilities which help us in keeping

ourselves updated to the aggressive

market needs.

Operations

Flexible Packaging produces

high quality packaging films and

laminates providing Flexographic and

Rotogravure Printing, Lamination,

Extrusion, Slitting, Bag & Sleeve and

Cone making.

Flexographic Printing line

On flexographic line, up to eight

colors flexographic printing can be

done on paper, poly-coated paper and

films.

Packages has the ability to print

real life images on materials like

Polyethylene, OPP, Special paper and

Polyester.

Video Mounter System has

eliminated the mis-registration from

the print.

process flow of folding cartons


13

Rotogravure Printing line

The Rotogravure printing line has

up to ten colors and the latest in-

house cylinder making and engraving

facilities. These particularly suit food

packaging where colorful package

designs and preservation of food

quality are important considerations.

Automatic viscosity control system

ensures consistent quality.

Lamination

Business Unit has both solvent base

and solvent less laminators that can

laminate BOPP, Polyester, Al foil, Met

OPP, Met PET and Paper.

Business Unit also helps customers

in developing cost effective laminates

to match their needs.

It also entails a soap wrapper

manufacturing facility. Packages is

honored to be the sole supplier of

soap wrappers for the entire soap

industry in Pakistan.

Extrusion

Business Unit has its own multi-layer

extrusion facility that can extrude

polyethylene of different grades and

colors.

Extrusion line extrudes a number of

specialized films which includes oil,

ghee, detergent and food films which

are known for their strength and high

barrier properties.

This Business Unit also has the

biggest blown film extruder with the

highest per hour capacity in Pakistan.

Slitting

The flexible line has efficient high

speed slitting machines whose output

is ready to be used on customer

packing machines. These machines

slit jumbo reels into smaller reels

according to customer requirements.

Finishing

Bag & Sleeve making: Bag making is

an integral part of the flexible line

that provides a wide variety of bag

constructions such as Side Seal,

Double side seal, Bottom Seal, Three

Side Seal, Bottom Gusset Bags and

Side Gusset Bags.

Cone Making: There are five high

speed machines which produce cones

in all sizes. Packages is the exclusive

producer of cones in Pakistan.



• PlanningManager

• TechnicalManager


• ManagerConversion

• ManagerPrinting

• ManagerTechnical&

Support

Sectors

Detergents

Food

Pesticides

Cosmetics

Tobacco Soaps

Pharmaceuticals

14

Printing

Raw Materials(Films, Foils and

Inks)

Flexographic

Rotogravure

Lamination

Finished Product

Extrusion

Slitting

Finishing

Solvent Based

Monolayer

Bags

Solvent Less

Three Layer

Cones

Five Layer

Sleeves

process flow of flexible packaging

an oil painting depicting tHe transcendent cHarm of tHe wazir kHan mosque in laHore. created by kHurram arsHad, 2010


15

a majestic artwork signifying tHe grandeur of sawi mosque in multan. created by soulat raza, 2005

16

Packages Limited has been

manufacturing corrugated containers

since 1974. Produced in a variety of

sizes and shapes, these containers

are of great value to our diverse

portfolio of customers for secure

transportation of their products to

local and international markets. With

plants in Kasur and Karachi, we have

the capability of producing more than

170 million corrugated containers per

year to cater to the ever-increasing

demand of high quality shipping

cartons.

Operations

Corrugated Containers are produced

out of Liner and Fluting paper

obtained from Company’s Paper &

Board Mills. Corrugator machine

corrugates the fluting paper and joins

it with the liner papers using starch

glue and heat to produce corrugated

board that is slit, creased and cut into

corrugated sheets as per dimensions

required by Customers.

These Corrugated Sheets are later

fed into printing and box making

machines that print, slot, crease, glue

and fold them in-line automatically to

produce complete ready to dispatch

Corrugated Boxes tied into bundles.

Some constructions require die-cut

and stitching processes as well.



• PlanningManager

• PlantManager–Karachi

• ProductionManager–Kasur

• ManagerConversion

• ManagerSheeting

• TechnicalManager

Corrugation, Sheet Cutting,Creasing and stacking

Paper Rolls Starch Glue

CorruwallSheets

CorruwallContainersstrapped in bundlesPrinting, slotting,

creasing, gluingand

folding

FinishedProduct

process flow of corrugated boxes

Corrugated Boxes

Corrugated Boxes business will be transferred to Bulleh Shah Packaging (Private) Limited [Formerly Bulleh Shah Paper Mill (Private) Limited] during 2013 as a result of joint venture agreement signed between Packages Limited and Stora Enso OYJ Group

Sectors

• Textile & Hosiery

• Food & Beverage

• Dairy & Ice Cream

• Tea

• Tobacco

• Soaps and Detergents

• Lubricants

• Match

• Pharma & Chemical

• Fruits & Vegetables

• Electrical & Household

appliances

• Sports Goods

• Shoe & Rubber

• Biscuits

• Bulbs

• Defense


17

Consumer Products Division

Packages started commercial

production of tissue and other

consumer products in 1982 at the

Lahore Plant. We currently provide

a complete range of tissue and

personal hygiene products that are

convenient, quick and easy to use;

ranging from facial tissues to tissue

rolls, table napkins, pocket packs,

kitchen rolls, wet tissues, party packs,

paper plates, cups and adult diapers.

We provide consumers complete

convenience with tissue and paper

products for every occasion. With its

high-quality tissue and consumer

products, business unit makes life

more comfortable for consumers

every day. The ideal solution for all

cleaning needs, our products give

consumers the confidence to always

be at their best.

Operations

Tissue manufacturing activity is

carried out at Paper Machine (PM-9)

with a production capacity of 100

tons per day.

Conversion includes making of facial

box tissue, tissue rolls, napkins, party

packs, kitchen rolls, pocket packs,

paper cups and plates.

We place great emphasis on product

development, after assessing

the demands and needs of our

consumers; continuously working on

providing improved and innovative

products to our consumers.

Brands

Key brands of Consumer Products

Division are:

• RosePetal

• Tulip

• DoubleHorse

• Tena



• NationalSalesManager

• BrandManager

• ManagerTissueConversion

• ManagerTissue

Manufacturing

an artwork inspired from tHe ancient sHrine of sHaH sHams tabrez in multan.created by sadia aslam, 2012

18

RecycledTissuePaper

PartyPacks

Jumbo Roll,N-fold

NapkinsPaperTowel

ToiletTissue

FacialTissue

WoodPulp

Pulping

Refining /Deflaking

Cleaning

Refining

Tissue Manufacturing

Tissue Reel

Away FromHome

Distribution

RetailDistribution

Export

Products

Process

Raw Materials

Consumers

Tissue Conversion

process flow of consumer products division


19

Packages believe that its entire operations have to be

in line with the needs of the customer; therefore, it is

necessary to consistently and timely provide good quality

products.

Customer Services Department (CSD)

Our service does not end once the contract has been

signed; CSD comprehensively monitors processes to

ensure on-time delivery to the customer and follows

new orders from Pre-Press up to final delivery to make

sure our product exceeds customer’s expectations.

CSD also arranges development activities as well as

technical support and after-sales support to customers.

Customer complaints are followed by proper feedback

and management reporting. With these activities, our

customers are given due attention and the essential quick

response all the time.

Pre-Press Department

Pre-Press is the nerve center of Packages Limited where

concepts and ideas are developed and woven with

marketing strategies of customers to attract the end users

of the products produced by customers.

The department has been revolutionized over the last 15

years and now has pre-press production designers and

computer artists who make the soft copies of the designs.

These halftone images and texts are simultaneously

directed from computers to:

• Imagesetters

• Platemakingdevices(CDI,

Digital System for Flexo)

• Digitalengravingmachines

In the Art and Camera Department, Packages has high-

tech computer systems where digital files are produced

instead of photographic negatives. For achieving high

quality in all printing methods (Roto, Flexo and Offset),

Pre-Press Department is equipped with the latest

technology in cylinder, photo polymer and plate making

equipment which provides support to various production

departments.

Pre-press converts the packaging design according to

the technical requirements of any printing technique like

gravure, flexography and offset without compromising the

creative integrity of designs.

Combining know-how in the pre-press area, vector & raster

data and the latest technology in hardware and software,

our pre-press team is able to provide the highest possible

services.

Research & Development

The Company’s Research & Development Department is

well equipped, both in terms of human resources and

equipment, to provide technical support to production

and to the external customers. These facilities are used

to study the effect of different variables on the process

and the product and are also available for comprehensive

testing of paperboard and its products.

Supply Management

Supply Management function came into existence to

provide one window operation to the Business Units

encompassing material procurement, logistics (for

incoming materials and outgoing finished goods),

warehousing, miscellaneous services and waste sales. In

order to rationalize the vendor base and to include quality

vendors, vendor development has also become one of the

integral activities of the division.

services

20

an exemplary art piece tHat displays tHe essence of tHe laHore fort. created by reHan, 2010

entity rating

of packages limited

Long-Term AA

Short-Term A1+

The Pakistan Credit Rating Agency Limited

Rating as on: July 2012

Rating Type Rating Comments

Long-Term AA (Double A) Very high credit quality. AA Ratings denote a very low expectation of credit risk. This indicates very strong capacity for timely payment of financial commitments. This capacity is not significantly vulnerable to

foreseeable events.

Short-Term A1+ (A One Plus) Obligations supported by the highest capacity for timely repayment.


21

Mr. Towfiq Habib Chinoy

Mr. Chinoy, Non -

Executive Director,

has been associated

with the Company as

Chairman of the Board

of Directors since 2008.

He holds chairmanship

of Jubilee General

Insurance Company

Limited and HBL

Asset Management

Ltd. He also holds

directorship of Linde

Pakistan Limited,

IGI Investment Bank

Limited, International

Steels Limited,

Jubilee Life Insurance

Company Limited and

Pakistan Center for

Philanthropy. He is

also serving as Trustee

of Mohatta Palace

Gallery Trust.

Mr. Ali joined Packages

Limited in July 1987

and presently holds

the position of

Managing Director of

the Company. He has

done his Masters in

Sciences from Institute

of Paper Chemistry and

has also served as Mill

Manager of Paper and

Board operations of

the Company. He holds

directorship in several

other companies

including IGI Insurance

Limited, International

Steels Limited, Nestle

Pakistan Limited,

Packages Lanka

(Private) Limited,

Sanofi-Aventis

Pakistan Limited,

Tri-Pack Films Limited

and Tetra Pak Pakistan

Limited. He is also

serving on the Board of

certain philanthropic,

educational, charitable

and business support

organizations including

Pakistan Centre

for Philanthropy,

National Management

Foundation, Syed

Maratib Ali Religious

and Charitable Trust,

Pakistan Business

Council and Babar Ali

Foundation. He is also

board member of Ali

Institute of Education,

International Chamber

of Commerce and

Lahore University of

Management Sciences.

Mr. Mehdi joined the

Company in 1980 and

currently holds the

position of Director

and General Manager

of the Company.

He has a Masters

degree in Business

Administration from

Institute of Business

Administration,

Karachi and has

served Packages Group

Companies in various

capacities over the

years. Currently he also

holds directorship of

DIC Pakistan Limited

and Packages Lanka

(Private) Limited.

Mr. Yacob joined

Packages Limited in

1988 and currently

holds the position

of Director and

Finance Manager of

the Company. He is

a fellow member of

Institute of Chartered

Accountants in

England & Wales and

Institute of Chartered

Accountants, Pakistan

and has been

associated at senior

management positions

in A.F. Ferguson

& Co, Chartered

Accountants, Pakistan

and Whinney Murray

& Co, Chartered

Accountants, Riyadh,

Saudi Arabia. Mr.

Yacob has vast

experience in financial

planning & budgeting,

financial forecasting

and analysis, asset

investment, taxation,

computer services,

client development

and staff management.

He also holds

directorship of IGI

Investment Bank

Limited, IGI Funds

Limited, Packages

Lanka (Private)

Limited, Tri-Pack Films

Limited and Tetra Pak

Pakistan Limited.

Mr. Aurangzeb is an

Independent Director

of the Company and

has over 26 years

banking experience

and has served The

Royal Bank of Scotland

in various positions

including Country

Manager Pakistan,

CFO Financial Markets

Business, Global Head

Portfolio Management

and Global Head

Commercial Client

Segment. Currently

he is serving as the

CEO of J.P. Morgan’s

Corporate Bank for

Asia.

Syed Aslam Mehdi Mr. Khalid Yacob Mr. Muhammad Aurangzeb

Syed Hyder Ali

board of directors

22

Mr. Khoja, is a NIT

Nominee Director on

Board of Packages

Limited. He has over

32 years professional

experience in the field

of Banking, Finance

and Mutual Fund

Industry. He is also

member on the Board

of other institutions

i.e., Bank Al-Habib

Limited, Fauji Fertilizer

Company Limited,

Askari Bank Limited,

Habib Metropolitan

Bank Limited, Pakistan

State Oil Company

Limited, Pak Suzuki

Motors Company

Limited, Burshane

Gas LPG (Pakistan)

Limited, Sui Northern

Gas Pipelines Limited,

Sui Southern Gas

Company Limited

and Thatta Cement

Company Limited

Mr. Ali is currently

associated with the

Company as Non-

Executive Director. He

also holds directorship

of several other

companies including

Treet Corporation

Limited, Treet Assets

(Private) Limited,

Treet Power Limited,

Loads Limited, IGI

Insurance Limited,

Ali Automobiles

Limited, First Treet

Manufacturing

Modaraba, Global

Econo Trade (Pvt.)

Limited, Multiple

Auto parts Industries

(Private) Limited,

Specialized Auto parts

Industries (Private)

Limited, Specialized

Motorcycles (Private)

Limited. He is also

actively involved in

social and cultural

activities and holds

senior positions on

the governing boards

of several hospitals

and philanthropic

organizations

including Liaquat

National Hospital.

Mr. Khan is currently

associated with the

Company as Non-

Executive Director.

He has also served

various Government

organizations in

different capacities

namely Securities

and Exchange

Commission of

Pakistan and Ministry

of Commerce. He has

also been engaged

with consultancy

assignments for Asian

Development Bank and

other organizations.

Currently, Mr. Khan

also holds directorship

of Abbott Laboratories

Pakistan Limited and

IGI Insurance Limited.

Mr. Nordlander has

been appointed as a

Non-Executive Director

of the Company as

a Nominee Director

of Stora Enso in

place of Mr. Matti

Ilmari Naaka who has

vacated his position

during the year 2012.

Mr. Nordlander

is Executive Vice

President at

Renewable Packaging,

having Regional

responsibility for Asia

Pacific and holding

position as MD Stora

Enso AB Sweden

(Country Manager).

He is also member of

the Board of Directors

of several Stora Enso

subsidiaries. He did

Diploma in Mechanical

Engineering. He is

also member of the

Stora Enso Group

Executive Team since

September 2007,

Chairman of Board

of Innventia, a pulp,

paper and packaging

R&D Company,

member of Swedish

Industrial Board of

Axcel private equity

fund, Vice Chairman of

the Board of Swedish

Forest Industrial

Federation and also

member of the Board

of Industrikraft.

Mr. Siddiqui is

associated with

the Company as an

Independent Director

since 2008. He holds a

Masters Degree from

the Karachi University

and a Post Graduate

degree in Development

Economics from

the University of

Cambridge UK. He

holds chairmanship of

State Life Insurance

Corporation of

Pakistan and Alpha

Insurance Co.

Limited. He also

holds directorship

of Sui Southern Gas

Company Limited,

International

Industries Limited,

Pakistan Cables

Limited, Fauji Fertilizer

Company Limited,

ORIX Leasing Pakistan

Limited, The Hub

Power Company

Limited, National

Bank of Pakistan, Sui

Northern Gas Pipelines

Limited and Thatta

Cement Company

Limited. He has also

served as Managing

Director of Rice

Export Corporation of

Pakistan, Chairman-

National Highways

Authority, Director

General Ports and

Shipping and Director

General Hajj, Embassy

of Pakistan, Jeddah.

Mr. Wazir Ali Khoja Syed Shahid Ali Mr. Shamim Ahmad Khan

Mr. Mats Nordlander

Mr. Shahid Aziz Siddiqui

board of directors


23

management committees

executive committee Syed Hyder Ali Chairman(Executive Director)

Syed Aslam Mehdi Member (Executive Director)

Khalid Yacob Member(Executive Director)

Executive committee is involved in day to day operations

of the Company and is authorized to conduct every

business except the businesses to be carried out by Board

of Directors as required by section 196 of The Companies

Ordinance, 1984.

audit committee

Shahid Aziz Siddiqui Chairman(Independent Director)

- Appointed on August 25, 2012

Mats Nordlander Member(Non-Executive Director)

- Appointed on October 20, 2012

Muhammad Aurangzeb Member(Independent Director)

Shamim Ahmad Khan Member(Non-Executive Director)

Syed Aslam Mehdi Member(Executive Director)

Syed Shahid Ali Member(Non-Executive Director)

Adi J. Cawasji Secretary

The terms of reference of the Audit Committee have been

derived from the Code of Corporate Governance applicable

to listed companies. Thereby Audit Committee shall,

among other things, be responsible for recommending

to the Board of Directors the appointment of external

auditors by the Company’s shareholders and shall consider

any questions of resignation or removal of external

auditors, audit fees and provision by external auditors

of any service to the Company in addition to audit of its

financial statements. In the absence of strong grounds

to proceed otherwise, the Board of Directors shall act

in accordance with the recommendations of the Audit

Committee in all these matters.

The terms of reference of the Audit Committee also include

the following:

a. Determination of appropriate measures to safeguard the Company’s assets;

b. Review of preliminary announcements of results prior to publication;

c. Review of quarterly, half-yearly and annual financial statements of the Company, prior to their approval by the Board of Directors, focusing on:

• Majorjudgmentalareas;

• Significantadjustmentsresultingfromtheaudit;

• Thegoing-concernassumption;

• Anychangesinaccountingpoliciesandpractices;

• Compliancewithapplicableaccountingstandards;

• Compliancewithlistingregulationsandotherstatutory and regulatory requirements; and

• Significantrelatedpartytransactions.

d. Review of preliminary announcements of results prior to publication;

e. Facilitating the external audit and discussion with external auditors of major observations arising from interim and final audits and any matter that the auditors may wish to highlight (in the absence of management, where necessary);

f. Review of management letter issued by external auditors and management’s response thereto;

g. Ensuring coordination between the internal and external auditors of the Company;

h. Review of the scope and extent of internal audit and ensuring that the internal audit function has adequate resources and is appropriately placed within the Company;

i. Consideration of major findings of internal investigations of activities characterized by fraud, corruption and abuse of power and management’s response thereto;

j. Ascertaining that the internal control system including financial and operational controls, accounting systems for timely and appropriate recording of purchases and sales, receipts and payments, assets and liabilities and the reporting structure are adequate and effective;

k. Review of the Company’s statement on internal control systems prior to endorsement by the Board of Directors and internal audit reports;

l. Instituting special projects, value for money studies or other investigations on any matter specified by the Board of Directors, in consultation with the Chief Executive and to consider remittance of any matter to the external auditors or to any other external body;

m. Determination of compliance with relevant statutory requirements;

n. Monitoring compliance with the best practices of corporate governance and identification of significant violations thereof; and

o. Consideration of any other issue or matter as may be assigned by the Board of Directors.

24

Human resource and remuneration (Hr&r) committee

“Remuneration and Appointments Committee” was renamed to “Human Resource and Remuneration (HR&R) Committee” during the year 2012 with its terms of reference amended in accordance with the Code. Number of Committee members increased from three to five with the induction of Mr. Shahid Aziz Siddiqui and Mr. Shamim Ahmad Khan as Independent Director and Non-Executive Director respectively.

Committee members include the following:-

Mr. Towfiq Habib Chinoy Chairman(Non-Executive Director)

Shahid Aziz Siddiqui Member(Independent Director)

Shamim Ahmad Khan Member(Non-Executive Director)

Syed Hyder Ali Member(Executive Director)

Syed Aslam Mehdi Member(Executive Director)

Ms. Asma Javed Secretary

This Committee is responsible for:

(i) Recommending human resource management policies to the Board;

(ii) Recommending to the Board the selection, evaluation, compensation (Including retirement benefits) and succession planning of the Managing Director/ Chief Executive Officer;

(iii) Recommending to the Board the selection, evaluation, compensation ( including retirement benefits) of Chief Operating Officer, Chief Financial Officer, Company Secretary and Head of Internal Audit; and

(iv) Consideration and approval on recommendations of Chief Executive Officer on such matters for key management positions who report directly to Chief

Executive Officer or Chief Operating Officer.

business strategy committee

Syed Hyder Ali Chairman(Executive Director)

Syed Aslam Mehdi Member (Executive Director)

Khalid Yacob Member (Executive Director)


a) Formulation of business strategy, review of risks and

their mitigation plan;

b) Staying abreast of developments and trends in the

Industry to assist the Board in planning for future

capital intensive investments and growth of the

Company;

c) Evaluation of proposed projects and funding thereof;

d) Investment portfolio analysis and strategic business

dimension.

system and tecHnology committee

Syed Aslam Mehdi Chairman(Executive Director)

Khalid Yacob Member(Executive Director)

Suleman Javed Member


a) Devising the I.T strategy within the organization to

keep all information systems of the Company updated

in a fast changing environment. This committee is

also responsible for evaluating ERP solutions and

data archiving solutions to achieve Company’s overall

goal towards Green Office Project;

b) Reviewing and recommending information technology

proposals suggested by management;

c) Promoting awareness of all stakeholders on needs for

investment in technology and related research work;

d) Reviewing and assessing Company’s systems

and procedures, recommending proposals on

technological innovations including plant up-

gradation, technology improvements etc. with

relevant cost benefit analysis.


25

enigmatic beautyan arabesque and floral composition ricH in its classic appeal.

vision, mission & policies

a painted vision of tHe wali mosque in multan. created by usman alvi, 2005

26

vision position ourselves to be a regional player of quality packaging, paper & paperboard and consumer products.

improve on contemporary measures including cost, quality, service, speed of delivery and mobilization.

keep investing in tecHnology, systems and Human resource to effectively meet tHe cHallenges every new dawn brings.

develop relationsHips witH all our stakeHolders based on sustainable cooperation, upHolding etHical values, wHicH tHe sHareHolders, management and employees represent and continuously strive for.

mission statementto be a leader in tHe markets we serve by providing quality products and superior service to our customers, wHile learning from tHeir feed back to set even HigHer standards for our products.

to be a company tHat continuously enHances its superior tecHnological competence to provide innovative solutions to customer needs.

to be a company tHat attracts and retains outstanding people by creating a culture tHat fosters openness and innovation, promotes individual growtH and rewards initiative and performance.

to be a company wHicH combines its people, tecHnology, management systems and market opportunities to acHieve profitable growtH wHile providing fair returns to its investors.

to be a company tHat endeavors to set tHe HigHest standards in corporate etHics in serving tHe society.


27

brOnze elegance tHe transcendent cHarm of geometric, floral and arabesque patterns. an alluring illustration of tHe iconic artwork of tHe laHore fort. created by kHurram, 2012

28

integrated management system (ims) policy

We intend to be a world class Company that not only

delivers quality products & services but also takes care of

its personnel health, safety & environment as a whole.

We are committed to achieving this by:

1. Complying with all applicable laws and regulatory

requirements.

2. Setting objectives and targets for reviewing and

improving management systems.

3. Developing an effective IMS system to prevent

incidents/accidents, ill health, pollution, waste

reduction, hazards elimination and environmental

impacts mitigation.

4. Ensuring that all food related packaging material is

produced, stored and delivered in safe and hygienic

condition as per relevant requirements

5. Continually improving our EHS and food safety

management system effectiveness.

6. Creating a safe and work friendly environment for all

stakeholders.

7. Implementing individual accountability to comply

with IMS requirements.

This policy is applicable to each individual whether

employee, contractor/sub-contractor, suppliers, visitors

and all other stake holders of the Company.

quality policy

Packages Limited is strongly committed to produce

quality products that confirm to consumer’s requirements

at a competitive price.

We shall continually improve our Quality Management

System and quality performance of all business processes.

We shall set quality objectives at all levels and allocate

appropriate resources to achieve them.

We shall ensure that all employees are well aware of

Company’s quality policy and are motivated to apply it in

their areas of responsibility.

statement of etHical practices

It is the basic principle of Packages Limited to obey

the law of the land and comply with its legal system.

Accordingly every director and employee of the Company

shall obey the law. Any director and employee guilty

of violation will be liable to disciplinary consequences

because of the violation of his / her duties.

Employees must avoid conflicts of interest between their

private financial activities and conduct of Company’s

business.

All business transactions on behalf of Packages Limited

must be reflected accordingly in the accounts of the

company. The image and reputation of Packages Limited is

determined by the way each and every one of us acts and

conducts himself / herself at all times.

We are an equal opportunity employer. Our employees are

entitled to a safe and healthy workplace.

Every manager and supervisor shall be responsible to

see that there is no violation of laws within his / her area

of responsibility which proper supervision could have

prevented. The manager and supervisor shall still be

responsible if he / she delegates particular tasks.

total productive maintenance (tpm) policy

We believe that TPM provides the life cycle approach

of improving the overall performance of the machine/

equipment through:

• Improvingproductivitybyhighlymotivatedstaff/

workers

• Satisfyingthecustomerneedsbydeliveringtheright

quantity at right time with desired quality.

We are committed to follow the TPM principles to enhance

our competitive position in the market and hence financial

position by achieving:

• Zeroaccidents

• Zerobreakdowns

• Zerodefects


29

core values

good governanceWe are committed to running our

business successfully and efficiently,

providing long term benefits to our

employees and shareholders, and

enriching the lives of those whom

we serve by fulfilling our corporate

responsibility to the best of our

ability. We expect excellence from

all processes, whether they relate

to policy formation and accounting

procedures or product development

and customer service.

work environmentOur policies and core values are

aimed towards creating an informal

yet stimulating team-oriented work

environment with a culture of sharing

and open communication. We cherish

the diversity of viewpoint of every

individual; we realize this encourages

innovation and develops character.

All employees have the right

to a stress and injury free work

environment. All our employees

are permitted and encouraged to

afford time and attention to personal

concerns.

our peopleThe success of any organization is

largely dependent on the people

working for it. Each member of our

team is considered equally important

and provided constant training,

motivation and guidance. We possess

a dedicated staff of the highest

caliber committed to making our

business a success.

We ensure that every employee

has the opportunity for maximum

professional development. To

achieve this goal, we seek to

provide challenging work prospects

for all employees. Each person is

compensated and rewarded for his or

her performance and hard work on a

strict merit basis.

conservationWe expect and encourage our

employees to actively participate in

community service and to take care

of the environment entrusted to us as

citizens sharing the earth’s resources.

customer satisfactionWe are customer-driven; we go the

extra mile to make sure our clients’

expectations are met and exceeded

on every issue. We partner with

leading companies to arm ourselves

with the latest technology and

provide customers with innovative

solutions in the most cost-effective

manner available.

etHical beHaviourWe make it clear that a sincere,

honest and decent human being

takes precedence over everything

else. In the Packages family, there

is an all-round respect for elders,

tolerance for equals and affection for

youngsters. Managers are expected

to lead from the front, train junior

colleagues through delegation,

resolve conflicts speedily, be visible

at all times and act as role models for

others.

Underlying everything we do and everything we believe in is a set of core values.

These guide us to deal with every aspect of any issue we might encounter in our

personal and professional lives. These values help us grow inside and outside,

personally and as an organization.

30

code of conduct

general principles • Compliancewiththelaw,regulations,statutory

provisions, ethical integrity and fairness is a

constant commitment and duty of all Packages

employees and characterizes the conduct of the

organization.

• TheCompany’sbusinessandactivitieshaveto

be carried out in a transparent, honest and fair

way, in good faith and in full compliance. Any

form of discrimination, corruption, forced or child

labour is rejected. Particular attention is paid

to the acknowledgment and safeguarding of the

dignity, freedom and equality of human beings.

• Allemployees,withoutanydistinctionor

exception whatsoever , respect the principles

and contents of the Code in their actions and

behaviours while performing their functions

according to their responsibilities, because

compliance with the Code is fundamental for

the quality of their working and professional

performance. Relationships among employees,

at all levels, must be characterized by honesty,

fairness, cooperation, loyalty and mutual respect.

• Thebeliefthatoneisactinginfavourortothe

advantage of the Company can never , in any way,

justify-noteveninpart–anybehaviourthatconflict

with the principles and content of the Code.

• ThePackagesCodeofConductaimsatguiding

the “Packages team” with respect to standards

of conduct expected in areas where improper

activities could result in adverse consequences to

the Company, harm its reputation or diminish its

competitive advantage.

• Everyemployeeisexpectedtoadhereto,and

firmly inculcate in his/her everyday conduct,

this mandatory framework; any contravention or

deviation will be regarded as misconduct and may

attract disciplinary action in accordance with the

Company service rules and relevant laws.

Packages Limited has built a reputation for conducting

its business with integrity, in accordance with high

standards of ethical behavior and in compliance with

the laws and regulations that govern our business. This

reputation is among our most valuable assets and

ultimately depends upon the individual actions of

each of our employees all over the country.

Packages Limited code of conduct has been prepared

to assist each of us in our efforts to not only

maintain but enhance this reputation. It provides

guidance for business conduct in a number of areas

and references to more detailed corporate policies for

further direction.

The adherence of all employees to high standards

of integrity and ethical behaviour is mandatory and

benefits all stakeholders including our customers, our

communities, our shareholders and ourselves.

The Company carefully checks for compliance with the

Code by providing suitable information, prevention

and control tools and ensuring transparency in all

transactions and behaviours by taking corrective

measures if and as required.

Packages Limited Code of Conduct applies to all

affiliates, employees and others who act for us

countrywide, within all sectors, regions, areas and

functions.


31

** Excluding reversal of impairment / (impairment) on available for sale investments

* Represents Continuing Operations only

(Rupees in Million) 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003

Assets Employed: Fixed Assets at Cost 9,275 28,472 27,749 26,887 25,789 23,691 18,217 10,925 7,578 7,227 Accumulated Depreciation / Amortisation 5,749 10,057 9,101 7,605 6,323 5,502 4,984 4,633 4,277 3,928 Net Fixed Assets 3,526 18,415 18,648 19,282 19,466 18,189 13,233 6,292 3,301 3,299 Other Non-Current Assets 20,932 16,488 12,442 8,347 8,645 10,413 6,026 770 749 685 Current Assets 7,030 8,841 8,534 7,979 6,923 4,837 3,414 4,559 2,425 2,171 Current Liabilities 4,482 3,442 2,421 1,743 5,617 1,965 2,312 2,336 1,749 1,098 Net Current and Other Non-Current Assets 23,480 21,887 18,555 14,583 9,952 13,285 7,128 2,993 1,425 1,757 Assets of Disposal Group 14,543 - - - - - - - - Net Assets Employed 41,549 40,301 37,204 33,865 29,418 31,473 20,361 9,285 4,726 5,056 Financed By: Paid up Capital 844 844 844 844 844 734 699 699 475 475 Reserves 28,406 27,098 24,480 20,967 15,429 17,437 12,974 7,037 3,716 3,157 Preference Shares / Convertible stock reserve 1,606 1,606 1,606 1,606 - - - - - - Shareholder’s Equity 30,856 29,548 26,930 23,417 16,273 18,171 13,673 7,736 4,192 3,633 Deferred Liabilities 553 2,178 2,317 2,478 841 956 688 547 527 567 Long-term Finances 4,471 8,575 7,956 7,971 12,304 12,347 6,000 1,001 6 857 Total Non-Current Liabilities 5,024 10,753 10,274 10,448 13,145 13,302 6,688 1,548 534 1,423 Liabilities of Disposal Group 5,669 - - - - - - - - - Total Funds Invested 41,549 40,301 37,204 33,865 29,418 31,473 20,361 9,285 4,726 5,056

Invoiced Sales 13,871* 13,797* 21,837 16,533 14,301 10,540 9,028 8,163 6,893 6,293 Materials Consumed 7,407* 7,282* 10,211 8,685 7,639 5,108 4,247 3,521 2,710 2,263 Cost of Goods Sold 10,386* 10,071* 17,733 13,736 11,281 7,829 6,552 5,746 4,678 4,242 Gross Profit 1,359* 1,315* 803 307 943 1,199 1,295 1,353 1,309 1,194 Employees Remuneration 1,174* 912* 1,502 1,229 1,033 835 758 651 576 551 Profit / (loss) from Operations **855* **872* (104) (384)** 405 588 758 902 789 718 Profit / (loss) Before Interest & Tax 2,750* 1,521* 881 5,770 (308) 4,633 6,348 1,330 1,187 1,037 Profit / (loss) After Tax 1,347* 161* (332) 4,064 (196) 4,326 6,101 1,015 958 814 EBITDA from Operations 947* 897* 1,242 719 955 1,167 1,098 1,217 1,246 1,138 Key Ratios: Profitability

Gross Profit Ratio (%) 9.80* 9.53* 3.68 1.86 6.60 11.38 14.34 16.57 18.98 18.97 Profit before Tax (%) 16.02* 7.52* (1.45) 34.90 (2.15) 43.96 70.31 16.29 17.21 16.48 EBITDA Margin to Sales (%) 6.83* 6.50* 5.68 14.91 6.68 11.08 12.17 14.91 18.07 18.09 Return on Assets (Rs.) 0.05* 0.01* (0.01) 0.11 (0.01) 0.13 0.27 0.09 0.15 0.13 Total Assets Turnover Ratio 0.44* 0.32* 0.55 0.46 0.41 0.32 0.40 0.70 1.06 1.02 Fixed Assets Turnover Ratio 4.42* 0.76* 1.22 0.86 1.26 1.01 2.92 2.70 2.32 2.13 Liquidity

Current Ratio 1.57* 2.57 3.52 4.58 1.23 2.46 1.48 1.95 1.39 1.98 Quick Ratio 1.03* 0.96 1.57 1.72 0.43 0.97 0.55 1.30 0.54 0.88 Gearing

Debt : Equity Ratio 13:87 22:78 23:77 25:75 44:56 40:60 30:70 11:89 00:100 19:81Return on Equity (%) **3.20* **1.87* (1.23) **(13.05) (1.20) 4.39 14.80 13.12 22.84 22.39 Investment

Basic EPS (Rs.) 15.97* 1.90* (3.94) 48.16 (2.32) 58.96 87.30 16.24 19.68 17.11 Diluted EPS (Rs.) 15.76* 1.90* (3.94) 44.72 (2.32) - - - - - Price - Earning Ratio 9.47* 43.43* (32.65) 2.99 (34.98) 6.17 2.41 12.44 10.10 9.81 Interest Cover Ratio 5.22* 3.16* 0.74 5.55 0.81 13.84 92.93 9.18 9.93 8.03 Dividend Yield (%) 2.98 1.81 2.53 2.26 - - 2.86 2.97 4.27 5.06 Dividend Cover Ratio 3.55* 1.27* (1.21) 14.82 - - 14.55 2.42 2.37 2.01 Cash dividend % 45.00 15.00 32.50 32.50 - - 60.00 60.00 85.00 85.00 Stock dividend % - - - - - 15.00 5.00 - - - Break-up value per Ordinary share (Rs.) 346.65 331.15 300.12 258.49 192.85 247.65 195.66 110.71 88.18 76.42 Market value per Ordinary Share - Year End (Rs.) 151.16 82.72 128.61 144.00 81.19 363.80 210.00 202.00 198.85 167.90 Cash dividend per share (Rs.) 4.5 1.5 3.25 3.25 - - 6.00 6.00 8.50 8.50

decade at a glance

32

(Rupees in Million) 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003

Assets Employed: Fixed Assets at Cost 9,275 28,472 27,749 26,887 25,789 23,691 18,217 10,925 7,578 7,227 Accumulated Depreciation / Amortisation 5,749 10,057 9,101 7,605 6,323 5,502 4,984 4,633 4,277 3,928 Net Fixed Assets 3,526 18,415 18,648 19,282 19,466 18,189 13,233 6,292 3,301 3,299 Other Non-Current Assets 20,932 16,488 12,442 8,347 8,645 10,413 6,026 770 749 685 Current Assets 7,030 8,841 8,534 7,979 6,923 4,837 3,414 4,559 2,425 2,171 Current Liabilities 4,482 3,442 2,421 1,743 5,617 1,965 2,312 2,336 1,749 1,098 Net Current and Other Non-Current Assets 23,480 21,887 18,555 14,583 9,952 13,285 7,128 2,993 1,425 1,757 Assets of Disposal Group 14,543 - - - - - - - - Net Assets Employed 41,549 40,301 37,204 33,865 29,418 31,473 20,361 9,285 4,726 5,056 Financed By: Paid up Capital 844 844 844 844 844 734 699 699 475 475 Reserves 28,406 27,098 24,480 20,967 15,429 17,437 12,974 7,037 3,716 3,157 Preference Shares / Convertible stock reserve 1,606 1,606 1,606 1,606 - - - - - - Shareholder’s Equity 30,856 29,548 26,930 23,417 16,273 18,171 13,673 7,736 4,192 3,633 Deferred Liabilities 553 2,178 2,317 2,478 841 956 688 547 527 567 Long-term Finances 4,471 8,575 7,956 7,971 12,304 12,347 6,000 1,001 6 857 Total Non-Current Liabilities 5,024 10,753 10,274 10,448 13,145 13,302 6,688 1,548 534 1,423 Liabilities of Disposal Group 5,669 - - - - - - - - - Total Funds Invested 41,549 40,301 37,204 33,865 29,418 31,473 20,361 9,285 4,726 5,056

Invoiced Sales 13,871* 13,797* 21,837 16,533 14,301 10,540 9,028 8,163 6,893 6,293 Materials Consumed 7,407* 7,282* 10,211 8,685 7,639 5,108 4,247 3,521 2,710 2,263 Cost of Goods Sold 10,386* 10,071* 17,733 13,736 11,281 7,829 6,552 5,746 4,678 4,242 Gross Profit 1,359* 1,315* 803 307 943 1,199 1,295 1,353 1,309 1,194 Employees Remuneration 1,174* 912* 1,502 1,229 1,033 835 758 651 576 551 Profit / (loss) from Operations **855* **872* (104) (384)** 405 588 758 902 789 718 Profit / (loss) Before Interest & Tax 2,750* 1,521* 881 5,770 (308) 4,633 6,348 1,330 1,187 1,037 Profit / (loss) After Tax 1,347* 161* (332) 4,064 (196) 4,326 6,101 1,015 958 814 EBITDA from Operations 947* 897* 1,242 719 955 1,167 1,098 1,217 1,246 1,138 Key Ratios: Profitability

Gross Profit Ratio (%) 9.80* 9.53* 3.68 1.86 6.60 11.38 14.34 16.57 18.98 18.97 Profit before Tax (%) 16.02* 7.52* (1.45) 34.90 (2.15) 43.96 70.31 16.29 17.21 16.48 EBITDA Margin to Sales (%) 6.83* 6.50* 5.68 14.91 6.68 11.08 12.17 14.91 18.07 18.09 Return on Assets (Rs.) 0.05* 0.01* (0.01) 0.11 (0.01) 0.13 0.27 0.09 0.15 0.13 Total Assets Turnover Ratio 0.44* 0.32* 0.55 0.46 0.41 0.32 0.40 0.70 1.06 1.02 Fixed Assets Turnover Ratio 4.42* 0.76* 1.22 0.86 1.26 1.01 2.92 2.70 2.32 2.13 Liquidity

Current Ratio 1.57* 2.57 3.52 4.58 1.23 2.46 1.48 1.95 1.39 1.98 Quick Ratio 1.03* 0.96 1.57 1.72 0.43 0.97 0.55 1.30 0.54 0.88 Gearing

Debt : Equity Ratio 13:87 22:78 23:77 25:75 44:56 40:60 30:70 11:89 00:100 19:81Return on Equity (%) **3.20* **1.87* (1.23) **(13.05) (1.20) 4.39 14.80 13.12 22.84 22.39 Investment

Basic EPS (Rs.) 15.97* 1.90* (3.94) 48.16 (2.32) 58.96 87.30 16.24 19.68 17.11 Diluted EPS (Rs.) 15.76* 1.90* (3.94) 44.72 (2.32) - - - - - Price - Earning Ratio 9.47* 43.43* (32.65) 2.99 (34.98) 6.17 2.41 12.44 10.10 9.81 Interest Cover Ratio 5.22* 3.16* 0.74 5.55 0.81 13.84 92.93 9.18 9.93 8.03 Dividend Yield (%) 2.98 1.81 2.53 2.26 - - 2.86 2.97 4.27 5.06 Dividend Cover Ratio 3.55* 1.27* (1.21) 14.82 - - 14.55 2.42 2.37 2.01 Cash dividend % 45.00 15.00 32.50 32.50 - - 60.00 60.00 85.00 85.00 Stock dividend % - - - - - 15.00 5.00 - - - Break-up value per Ordinary share (Rs.) 346.65 331.15 300.12 258.49 192.85 247.65 195.66 110.71 88.18 76.42 Market value per Ordinary Share - Year End (Rs.) 151.16 82.72 128.61 144.00 81.19 363.80 210.00 202.00 198.85 167.90 Cash dividend per share (Rs.) 4.5 1.5 3.25 3.25 - - 6.00 6.00 8.50 8.50

decade at a glance


33

(Rupees in Million)

2012 12 vs 11 2011 11 vs 10 2010 10 vs 09 2009 09 vs 08 2008 08 vs 07 2007EQUITY & LIABILITIES Rs. % Rs. % Rs. % Rs. % Rs. % Rs.

SHARE CAPITAL & RESERVES

Issued Subscribed and Paid Up Capital 844 - 844 - 844 - 844 - 844 14.99 734 Reserves 31,075 10.28 28,179 16.35 24,219 41.64 17,099 9.44 15,625 19.18 13,110 Preference shares / convertible stock reserve 1,606 - 1,606 - 1,606 - 1,606 100.00 - - - Unappropriated (loss) / profit (2,669) 146.90 (1,081) (514.18) 261 (93.25) 3,868 (2,073.47) (196) (104.53) 4,327

NON-CURRENT LIABILITIES

Long-term finances 4,471 (47.86) 8,575 7.77 7,957 (0.16) 7,970 (35.22) 12,304 (0.34) 12,346 Deferred income tax liabilities 346 (82.73) 2,004 (7.56) 2,168 (7.86) 2,353 218.83 738 (14.39) 862 Retirement benefits 86 561.54 13 7,684.43 0.17 100.00 - - - - - Deferred liabilities 121 (25.31) 162 8.72 149 19.20 125 21.36 103 9.57 94

CURRENT LIABILITIES

Current portion of long-term finances 1,000 162.47 381 2,621.43 14 100.00 - (100.00) 550 100.00 - Finances under mark up arrangements - secured 809 1.63 796 464.54 141 63.95 86 (96.68) 2,588 545.39 401 Derivative financial instruments 165 100.00 - - - - - - - - - Trade and other payables 1,977 14.21 1,731 (3.51) 1,794 27.51 1,407 18.53 1,187 (16.88) 1,428 Accrued Finance Cost 531 (0.56) 534 13.14 472 88.80 250 (9.09) 275 102.21 136 Liabilities directly associated with non-current assets classified as held-for-sale 5,669 100.00 - - - - - (100.00) 1,017 100.00 -

TOTAL 46,031 5.23 43,744 10.39 39,625 11.28 35,608 1.64 35,035 4.77 33,438

Vertical Analysis

2012 2011 2010 2009 2008 2007EQUITY & LIABILITIES Rs. % Rs. % Rs. % Rs. % Rs. % Rs. %

SHARE CAPITAL & RESERVES

Issued Subscribed and Paid Up Capital 844 1.83 844 1.93 844 2.13 844 2.37 844 2.41 734 2.20 Reserves 31,075 67.51 28,179 64.42 24,219 61.12 17,099 48.02 15,625 44.60 13,110 39.21 Preference shares / convertible stock reserve 1,606 3.49 1,606 3.67 1,606 4.05 1,606 4.51 - - - - Unappropriated (loss) / profit (2,669) (5.80) (1,081) (2.47) 261 0.66 3,868 10.86 (196) (0.56) 4,327 12.94


Long-term finances 4,471 9.72 8,575 19.60 7,957 20.08 7,970 22.38 12,304 35.12 12,346 36.92 Deferred income tax liabilities 346 0.75 2,004 4.58 2,168 5.47 2,353 6.61 738 2.11 862 2.58 Retirement benefits 86 0.19 13 0.03 0.17 0.00 - - - - - - Deferred liabilities 121 0.26 162 0.37 149 0.38 125 0.35 103 0.29 94 0.28

CURRENT LIABILITIES

Current portion of long-term finances 1,000 2.17 381 0.87 14 0.04 - - 550 1.57 - - Finances under mark up arrangements - secured 809 1.76 796 1.82 141 0.36 86 0.24 2,588 7.39 401 1.20 Derivative financial instruments 165 0.36 - - - - - - - - - - Trade and other payables 1,977 4.29 1,731 3.96 1,794 4.53 1,407 3.95 1,187 3.39 1,428 4.27 Accrued Finance Cost 531 1.15 534 1.22 472 1.19 250 0.70 275 0.78 136 0.41 Liabilities directly associated with non-current assets classified as held-for-sale 5,669 12.32 - - - - - - 1,017 2.90 - -

TOTAL 46,031 100 43,744 100 39,625 100 35,608 100 35,035 100 33,438 100

Horizontal Analysis

Horizontal & vertical analysisbalance sHeet

Equity and Liabilities(Rupees in Million)

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

2012*

2011

2010

2009

2008

2007

30,85676%

68%

68%

69%

46%

54% 40% 6%

38% 16%

31% 0.5%

26% 6%

25% 7%

12% 12%4,481

3,442

2,421

1,743

5,617

1,965

5,024

10,753

10,274

10,448

13,145

13,302

29,548

26,930

23,417

16,273

18,171

Share Capital & Reserves Non-Current Liabilities Current Liabilities * Represents Continuing Operations only

34

(Rupees in Million)

2012 12 vs 11 2011 11 vs 10 2010 10 vs 09 2009 09 vs 08 2008 08 vs 07 2007

ASSETS Rs. % Rs. % Rs. % Rs. % Rs. % Rs.

NON-CURRENT ASSETS

Property, plant and equipment 3,459 (81.15) 18,346 (1.45) 18,615 (3.18) 19,227 (1.11) 19,442 7.04 18,163 Intangible assets 26 (33.33) 39 1,850.00 2 100.00 - - - - - Investment property 41 36.67 30 (6.25) 32 (41.82) 55 120.00 25 (3.85) 26 Investments 20,796 27.68 16,288 33.30 12,219 50.87 8,099 (3.15) 8,362 (17.04) 10,080 Long- term loans and deposits 97 (12.61) 111 (13.95) 129 (7.86) 140 (10.26) 156 (36.07) 244 Retirement benefits 39 (56.18) 89 (6.32) 95 (12.04) 108 (15.63) 128 45.45 88

CURRENT ASSETS

Stores and spares 462 (52.81) 979 (6.76) 1,050 20.55 871 3.57 841 17.46 716 Stock-in-trade 1,909 (57.82) 4,526 23.36 3,669 (10.56) 4,102 12.32 3,652 65.55 2,206 Trade debts 2,280 29.18 1,764 7.43 1,643 (6.22) 1,752 15.04 1,523 18.15 1,289 Loans, advances, deposits, prepayments and other receivables 413 (9.23) 455 71.70 265 29.90 204 (30.38) 293 (12.54) 335 Income Tax Receivable 1,603 70.35 941 22.85 766 28.96 594 48.87 399 110.00 190 Cash and bank balances 363 106.25 176 (84.56) 1,140 150.00 456 129.15 199 97.03 101 Non-current assets classified as held-for-sale 14,543 100.00 - - - - - (100.00) 15 100.00 -

TOTAL 46,031 5.23 43,744 10.40 39,625 11.28 35,608 1.64 35,035 4.78 33,438

Vertical Analysis

2012 2011 2010 2009 2008 2007

ASSETS Rs. % Rs. % Rs. % Rs. % Rs. % Rs. %

NON-CURRENT ASSETS

Property, plant and equipment 3,459 7.51 18,346 41.93 18,615 46.97 19,227 54.00 19,442 55.50 18,163 54.32 Intangible assets 26 0.06 39 0.09 2 0.01 - - - - - - Investment property 41 0.09 30 0.07 32 0.08 55 0.15 25 0.07 26 0.08 Investments 20,796 45.19 16,288 37.23 12,219 30.84 8,099 22.74 8,362 23.87 10,080 30.15 Long- term loans and deposits 97 0.21 111 0.25 129 0.33 140 0.39 156 0.45 244 0.73 Retirement benefits 39 0.08 89 0.20 95 0.24 108 0.30 128 0.37 88 0.26

CURRENT ASSETS

Stores and spares 462 1.00 979 2.24 1,050 2.65 871 2.45 841 2.40 716 2.14 Stock-in-trade 1,909 4.15 4,526 10.35 3,669 9.26 4,102 11.52 3,652 10.42 2,206 6.60 Trade debts 2,280 4.95 1,764 4.03 1,643 4.15 1,752 4.92 1,523 4.35 1,289 3.85 Loans, advances, deposits, prepayments and other receivables 413 0.90 455 1.04 265 0.67 204 0.57 293 0.84 335 1.00 Income Tax Receivable 1,603 3.48 941 2.15 766 1.93 594 1.67 399 1.14 190 0.57 Cash and bank balances 363 0.79 176 0.40 1,140 2.88 456 1.28 199 0.57 101 0.30 Non-current assets classified as held-for-sale 14,543 31.59 - - - - - - 15 0.04 - -

TOTAL 46,031 100 43,744 100 39,625 100 35,608 100 35,035 100 33,438 100

Horizontal Analysis

Composition of Assets(Rupees in Million)

0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000

2012*

2011

2010

2009

2008

2007

3,52611%

42%

47%

55%

56%

54% 31% 15%

25% 19%

23% 22%

31% 22%

38% 20%

66% 23%7,030

8,841

8,534

7,979

6,923

4,837

20,932

16,488

12,442

8,347

8,645

10,413

18,415

18,649

19,282

19,466

18,188

Operating Fixed Assets Other Non-Current Assets Current Assets * Represents Continuing Operations only


35

Horizontal Analysis(Rupees in Million)

2012 12 vs 11 2011 11 vs 10 2010 10 vs 09 2009 09 vs 08 2008 08 vs 07 2007 Rs. % Rs. % Rs. % Rs. % Rs. % Rs.

Local sales 13,808 0.62 13,723 (33.38) 20,598 30.57 15,776 15.17 13,698 32.16 10,365 Export sales 63 (14.86) 74 (94.03) 1,239 63.67 757 25.54 603 244.57 175

Gross sales 13,871 0.54 13,797 (36.82) 21,837 32.08 16,533 15.61 14,301 35.68 10,540 Sales tax and excise duty (2,110) (11.83) (2,393) (26.75) (3,267) 32.48 (2,466) 19.94 (2,056) 36.98 (1,501)Commission (16) (11.11) (18) (47.06) (34) 47.83 (23) 15.00 (20) 100.00 (10)

Net sales 11,745 3.15 11,386 (38.57) 18,536 31.99 14,044 14.88 12,225 35.40 9,029 Cost of sales (10,386) 3.13 (10,071) (43.21) (17,733) 29.10 (13,736) 21.75 (11,282) 44.09 (7,830)

Gross profit 1,359 3.35 1,315 63.76 803 160.71 308 (67.34) 943 (21.35) 1,199 Administrative expenses (346) 20.56 (287) (43.84) (511) 9.19 (468) (8.59) (512) 47.13 (348)Distribution and marketing costs (416) 7.77 (386) (33.33) (579) 30.41 (444) 22.65 (362) 50.83 (240)Projects expenditure - (100.00) (56) 1,300.00 (4) 100.00 - - - - - Other operating expenses (31) 675.00 (4) (73.33) (15) (87.39) (119) 100.00 - (100.00) (145)Other operating income 289 (0.34) 290 43.56 202 (47.53) 385 14.58 336 175.41 122

Profit / (Loss) from operations 855 (1.95) 872 (938.46) (104) (69.23) (338) (183.46) 405 (31.12) 588 Finance costs (528) 9.09 (484) (60.00) (1,210) (5.32) (1,278) (23.10) (1,662) 351.63 (368)Investment income 1,534 47.50 1,040 4.31 997 (89.14) 9,180 867.33 949 (78.50) 4,413 Reversal of Impairment/ (impairment) on investments 361 (192.33) (391) 100.00 - (100.00) *(1,794) 100.00 - - -

Profit / (Loss) before tax 2,222 114.27 1,037 (427.13) (317) (105.49) 5,770 (1,973.38) (308) (106.65) 4,633 Taxation (875) (0.11) (876) 5,740.00 (15) (99.12) (1,706) (1,623.21) 112 (136.48) (307)

Profit / (Loss) for the year from continuing operations 1,347 736.65 161 (148.49) (332) (108.17) 4,064 (2,173.47) (196) (104.53) 4,326 Loss for the year from Discontinued operations (4,059) 134.76 (1,729) - - - - - - - -

(Loss) / profit for the year (2,712) 72.96 (1,568) (148.49) (332) (108.17) 4,064 (2,173.47) (196) (104.53) 4,326

Basic earnings/ (loss) per share - From Continuing operations 15.97 1.90 - From Discontinued operations (48.10) (20.48)

- From (loss) / profit for the year (32.13) (18.58) 3.94 48.16 2.32 51.27 Diluted earnings/ (loss) per share - From Continuing operations 15.76 1.90 - From Discontinued operations (48.10) (20.48)

- From (loss) / profit for the year (32.34) (18.58) 3.94 48.16 - -

* Impairment charged on investments has been re-classified for the purposes of comparison

This financial information is based upon audited financial results of the Company of respective years unless represented in accordance with applicable financial reporting framework

Horizontal & vertical analysisprofit and loss account

(Represented)

Profit and Loss – Breakup of Major Expenses as % of Sales(Rupees in Million)

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

2012*

2011*

2010

2009

2008

2007

63% 8% 3% 15% 6% 5%

64% 3%7% 15% 6% 4%

47% 14% 7% 14% 5% 6%

53% 13% 8% 10% 6% 8%

53% 12% 6% 7% 6% 12%

48% 10% 5% 11% 6% 5%

Material Consumed Fuel & Power Depreciation and Amortisation Costs of Sales (Other Components)

Selling & Administrative Expenses Finance Costs & Other Charges * Represents Continuing Operations only

36

Vertical Analysis

(Rupees in Million)

2012 2011 2010 2009 2008 2007 Rs. % Rs. % Rs. % Rs. % Rs. % Rs. %

Local sales 13,808 99.55 13,723 99.46 20,598 94.33 15,776 95.42 13,698 95.78 10,365 98.34 Export sales 63 0.45 74 0.54 1,239 5.67 757 4.58 603 4.22 175 1.66

Gross sales 13,871 100.00 13,797 100.00 21,837 100.00 16,533 100.00 14,301 100.00 10,540 100.00 Sales tax and excise duty (2,110) (15.21) (2,393) (17.34) (3,267) (14.96) (2,466) (14.92) (2,056) (14.38) (1,501) (14.24)Commission (16) (0.12) (18) (0.13) (34) (0.16) (23) (0.14) (20) (0.14) (10) (0.09)

Net sales 11,745 84.67 11,386 82.53 18,536 84.88 14,044 84.95 12,225 85.48 9,029 85.66 Cost of sales (10,386) (74.88) (10,071) (72.99) (17,733) (81.21) (13,736) (83.08) (11,282) (78.89) (7,830) (74.29)

Gross profit 1,359 9.80 1,315 9.53 803 3.68 308 1.86 943 6.59 1,199 11.38 Administrative expenses (346) (2.49) (287) (2.08) (511) (2.34) (468) (2.83) (512) (3.58) (348) (3.30)Distribution and marketing costs (416) (3.00) (386) (2.80) (579) (2.65) (444) (2.69) (362) (2.53) (240) (2.28)Projects expenditure - - (56) (0.41) (4) (0.02) - - - - - - Other operating expenses (31) (0.22) (4) (0.03) (15) (0.07) (119) (0.72) - - (145) (1.38)Other operating income 289 2.08 290 2.10 202 0.93 385 2.33 336 2.35 122 1.16

Profit / (Loss) from operations 855 6.16 872 6.32 (104) (0.48) (338) (2.04) 405 2.83 588 5.58 Finance costs (528) (3.81) (484) (3.51) (1,210) (5.54) (1,278) (7.73) (1,662) (11.62) (368) (3.49)Investment income 1,534 11.06 1,040 7.54 997 4.57 9,180 55.53 949 6.64 4,413 41.87 Reversal of Impairment/ (impairment) on investments 361 2.60 (391) (2.83) - - *(1,794) (10.85) - - - -

Profit / (Loss) before tax 2,222 16.02 1,037 7.52 (317) (1.45) 5,770 34.90 (308) (2.15) 4,633 43.96 Taxation (875) (6.31) (876) (6.35) (15) (0.07) (1,706) (10.32) 112 0.78 (307) (2.91)

Profit / (Loss) for the year from continuing operations 1,347 9.71 161 1.17 (332) (1.52) 4,064 24.58 (196) (1.37) 4,326 41.04

Loss for the year from Discontinued operations (4,059) (29.26) (1,729) - - - - - - - - -

(Loss) / profit for the year (2,712) (19.55) (1,568) 1.17 (332) (1.52) 4,064 24.58 (196) (1.37) 4,326 41.04

Basic earnings/ (loss) per share - From Continuing operations 15.97 1.90 - From Discontinued operations (48.10) (20.48)

- From (loss) / profit for the year (32.13) (18.58) 3.94 48.16 2.32 51.27 Diluted earnings/ (loss) per share - From Continuing operations 15.76 1.90 - From Discontinued operations (48.10) (20.48)

- From (loss) / profit for the year (32.34) (18.58) 3.94 48.16 - - * Impairment charged on investments has been reclassified for the purposes of comparison

This financial information is based upon audited financial results of the Company of respective years unless represented in accordance with applicable financial reporting framework

(Represented)


37

This statement shows value added by the operations of the Company and its distribution to the stakeholders.

(Rupees in thousand) 2012 2011 2010

Wealth Generated

Sales 25,934,550 24,543,691 21,837,433

Dividend Income 1,534,440 1,037,255 946,292

Other Income-net of Impairment (3,924,330) (33,825) 253,336

23,544,660 100% 25,547,121 100% 23,037,061 100%

Wealth Distributed

Bought-in-materials & Services 20,366,109 86% 22,419,506 87% 19,014,938 83%

To Employees

Remuneration, benefits and facilities 2,251,291 10% 1,772,035 7% 1,502,465 7%

To Government

Income Tax, Sales Tax, Custom & Excise Duties,

Workers’ Funds, EOBI & Social Security

Contribution, Professional & Local Taxes 2,132,850 9% 1,438,222 6% 1,641,760 7%

To Providers of Capital

Cash dividend to the ordinary shareholders 379,708 2% 126,569 1% 274,233 1%

Finance Costs 1,505,875 6% 1,485,310 6% 1,210,323 5%

Utilized from revenue reserves (3,091,173) -13% (1,694,521) -7% (606,658) -3%

23,544,660 100% 25,547,121 100% 23,037,061 100%

This statement is prepared at Entity level by combining the results of Continuing and Discontinued Operations for more proper

presentation of Entity level generation of wealth and its distribution.

value added and its distribution

Value Added and its Distubution - 2011(Percentage)

Bought-in-materials & Services – 87%

Employees – 7%

Shareholders – 1%

Government – 6%

Finance Costs – 6%

Utilized from revenue reserves – (7%)

Value Added and its Distubution - 2012(Percentage)

Bought-in-materials & Services – 86%

Employees – 10%

Shareholders – 2%

Government – 9%

Finance Costs – 6%

Utilized from revenue reserves – (13%)

38

Over the last six years

(Rupees in thousand)

2012 2011 2010 2009 2008 2007

Cash flow from operating activities

Cash generated from / (used in) operations 395,637 (810,780) 2,048,790 618,112 (708,816) 326,117

Finance cost paid (1,509,395) (1,423,001) (988,292) (1,479,667) (1,800,985) (1,051,738)

Taxes paid (758,677) (431,528) (490,263) (285,615) (220,937) (139,191)

Payments for accumulating compensated absences (28,670) (10,524) (16,805) (6,971) (12,268) (6,783)

Retirement benefits paid (73,960) (62,831) (50,488) (44,236) (35,564) (30,339)

Net cash (used in) / generated from operating activities (1,975,065) (2,738,664) 502,942 (1,198,377) (2,778,570) (901,934)

Cash flow from investing activities

Fixed capital expenditure (1,234,627) (1,225,371) (633,758) (972,975) (2,447,617) (4,841,392)

Acquisition of subsidiary (9) - - - - -

Investment - net 13 3,035 50,968 (10,000) - (12,903)

Advance against disposal of investments - - - - 1,017,150 -

Net decrease / (increase) in long-term loans and deposits 13,768 17,556 11,148 15,525 89,064 (63,548)

Proceeds from disposal of property, plant and equipment 113,764 190,023 25,034 23,543 21,252 48,401

Proceeds from assets written off due to fire 233,463 384,563 - - - -

Proceeds from disposal of investments - - - 7,865,000 - 71,428

Dividends received 1,534,440 1,037,255 946,292 313,087 948,879 646,650

Net cash generated from / (used in) investing activities 660,812 407,061 399,684 7,234,180 (371,272) (4,151,364)

Cash flow from financing activities

Repayment of long-term finances - secured (5,485,714) (14,286) - (7,354,400) - -

Proceeds from long-term finances 2,000,000 1,000,000 - - - 6,346,500

Proceeds from issuance of preference shares / convertible stock - net - - - 4,076,452 - -

Proceeds from Ijarah finance - - - - 1,061,208 -

Payment of finance lease liabilities - - - - - (851)

Dividend paid (126,044) (273,574) (272,938) - - (418,194)

Net cash (used in) / generated from financing activities (3,611,758) 712,140 (272,938) (3,277,948) 1,061,208 5,927,455

Net (decrease) / increase in cash and cash equivalents (4,926,011) (1,619,463) 629,688 2,757,855 (2,088,634) 874,157

Cash and cash equivalents at the beginning of the year (620,551) 998,912 369,224 (2,388,631) (299,997) (1,174,154)

Cash and cash equivalents at the end of the year (5,546,562) (620,551) 998,912 369,224 (2,388,631) (299,997)

sources and application of funds

Operating Activities(Rupees in Million)

201220112010200920082007-3000

-2500

-2000

-1500

-1000

-500

0

500

1000

(902

)

(2,7

79)

(1,1

98)

(2,7

39)

(1,9

75)

503

Investing Activities(Rupees in Million)

201220112010200920082007-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

(4,1

51)

(371

)

7,23

4

407 66

1

400

Financing Activities(Rupees in Million)

201220112010200920082007-4,000

-3,000

-2,000

-1,000

0

1,000

2,000

3,000

4,000

5,000

6000

5,92

7

1,06

1

(3,2

78)

712

(3,6

12)

(273

)


39

brOnze elegance tHe transcendent cHarm of geometric, floral and arabesque patterns.

an artwork displaying tHe arabesque elements found in tHe interior of tHe wazir kHan mosque in laHore. created by abdul samad, 2010

corporate calendar

40

Major Events and Meetings Date

Audit Committee and Board of Directors meeting to consider annual accounts of the Company for

the year ended December 31, 2011 March 21 ,2012

Audit Committee and Board of Directors meeting to consider quarterly accounts of the Company

for the quarter ended March 31, 2012 April 24 , 2012

Annual General Meeting of shareholders to consider annual accounts of the Company

for the year ended December 31, 2011 and dividend announcement April 30, 2012

Successful completion of 10 years operations of Corrugator Plant, Karachi July 31, 2012


for the quarter ended June 30, 2012 August 25 , 2012

Re-commencement of commercial operations of Consumer Products Division after the unfortunate

fire incident in 2011 August 31, 2012

Signing of Joint Venture Agreement with Stora Enso OYJ Group of Finland in respect of

Paper & Paperboard and Corrugated businesses September 17, 2012


for the quarter ended September 30, 2012 October 20 , 2012

Installation of High Speed Rotogravure printing machine in Business Unit Flexible Packaging October 31, 2012


41

Corporate Social Responsibility

(CSR) is about capacity building for

sustainable livelihoods. It respects

cultural differences and finds the

business opportunities in building the

skills of employees, the community

and the government”, In a nutshell,

CSR is about business “giving back

to society”. Packages activities in the

field of corporate social responsibility

are an important part of corporate

sustainability. As successful

members of the community, we have

a responsibility to help those that

are less fortunate and contribute

to the common good. CSR practice

at Packages is an evidence of

commitment to its stakeholders. On

a daily basis, we strive to safeguard

the health and well being of our

employees, neighbors and customers,

as well as the communities in which

we live, work and operate. Our work is

based on the Code of Conduct, which

provides the basis for our approach

to such issues as environment, health

and safety, employee relations,

human rights, business ethics and

community involvement.

EnvironmentPackages aims to increase the quality

of life for people at all levels of

society, conserve energy and preserve

precious environmental resources.

The idea is to go “Green” in Pakistan.

Moreover, we strive to minimize

energy consumption and wherever

possible, use environment friendly

sources of energy.

Packages is a member of the global

network of green offices project of

the World Wide Fund for nature and

the first company in Pakistan to be

awarded Green Office Diploma in

the manufacturing sector. Green

Office is an environmental service for

offices. With its help, workplaces are

able to reduce their burden on the

environment, achieve savings and

slow down climate changes.

We have already phased out CFC’s

(Chlorofluorocarbon’s) gases

according to Montreal Protocol and

have been reducing the consumption

of HCFC’s by replacing them with

approved gases to control the

greenhouse effect.

We have conducted detailed energy

audits to identify projects that can

efficiently use, reduce or recycle

energy. Packages is also working on

proper utilization of Solar technology

and as a first step; the Company

has replaced all its street lights with

solar backed LED lights. Production

lights were also replaced by less and

more efficient LED systems. Future

solar projects are also in pipelines to

reduce our carbon footprint.

Weusetheagriculturalby–product

‘wheat straw’ as a raw material for

paper and board manufacturing,

contributing towards a greener earth

By reducing, re-using and recycling

waste material including waste paper

and post consumer liquid packaging

waste we are contributing to the well

being of society.

Packages has installed an Effluent

Treatment Plant worth Rs. 476 million

at its Kasur Plant offering a clean

environment to the surrounding

locality by treating waste water as per

prescribed limits before discharge to

the drain. We also reuse and recycle

our process water.

corporate social responsibility

Environment Preservation

Health And Safety

Quality Product

Human Capital Social Responsibility

42

Packages has also gone through the

new certification audits for OHSAS

18001 for Lahore and Kasur sites,

Quality Management System QMS

ISO:9001 & Food Safety Management

System FSMS ISO:22000 for Kasur

Site, Environment Management

System EMS ISO 14001 for Kasur

Site. EMS ISO: 14001, HACCP

recertification audit for Lahore site.

Other than certifications Packages

was also awarded Fire Safety award

2012, Food Safety award 2012,

Environment Excellence award 2012,

Green Supply chain Award 2012 and

CSR award 2012.

Health and safety Sound environmental practices are

an important component of Packages

corporate culture. On daily basis

we strive to safeguard the health

and well being of our employees,

neighbours and customers, as well as

the communities where we live, work

and in which we operate.

One of the Corporate Objectives of

the Company is to provide safe and

healthy work place to its employees

and other stakeholders. The provision

of a safe working environment is

paramount at Packages. Safety

statistics fill an important function

in the company’s health and safety

activities and form the basis of

risk analysis and continuous

improvements.

Our main procedures in safety include

a comprehensive risk assessment and

control procedure, permit to work,

log out tag out, incident reporting,

emergency response, and compliance

evaluation procedures. All new

entrants go through safety orientation

program and sign an affidavit of their

awareness. We carry both external

and internal trainings regarding

occupational health and safety.

We also abide by all national

and local laws applicable to our

industry. We are audited on them by

government bodies and our status

is available on SEDEX (Supplier

Ethical Data Exchange Program). We

regularly review our risk assessments

and infer our yearly targets from them

as well. All incidents and changes

are immediately incorporated in risk

assessments. A special contractor

safety program is also available.

We also maintain loss time incident

and loss time accident reports based

on OHSAS and IFC guidelines.

Packages has a well defined

emergency response procedure both

centrally and on department levels.

These drills are practiced regularly

in all three shifts. All departments

have their own rescue, salvage and

fire fighting teams in addition to the

central fire department.

Various awareness campaigns

including motor bike safety

campaigns, forklift driver assessment

and dengue precautions were taken

at Packages including awareness

sessions and safety talks, pamphlet

distribution, extraction of stagnant

water and cleanliness and internal

and external sprays.

Quality ProductOne of our prime responsibility is

to deliver quality product to our

customers so that the eventual

consumer can cherish the benefits

of a quality product. To achieve

quality product, an organization

needs to have tighter control

over the quality of inputs and

outputs and also need to review

its production process regularly

to generate value preposition for

its customers and stakeholders. In

this respect, Packages takes various

initiatives to achieve overall product

excellence like implementation of

Total Productive Maintenance (‘TPM’)

that is improving our production

efficiencies. The Company is certified

for the quality management system

ISO 9001:2008 Edition. The quality

assurance initiatives for the year 2012

were not only a source of inspiration

for all our employees but also

resulted in reduction in process waste

and cost. In line with our approach,

we have been through a number

of third party and customer audits

in 2012 to reiterate our promise of

delivering quality products.

SocietyIt’s our mission to create

opportunities so people can

live better. We consider it our

responsibility to make a positive

impact in the communities we serve.

Whether it’s through the grants

we provide to the thousands of

organizations that share our mission

or through the inspiring volunteer

efforts, we are passionate about

helping people live better.

Packages visualizes a clear

connection between the growth of

the company and the strength of the

communities where we operate. We

strive to contribute to societal welfare

through providing educational

opportunities, employment,

sponsoring various events promoting

culture, arts etc and organizing events

& awareness campaigns.

corporate social responsibility


43

Community welfare schemes

Making a difference is important to

all of us at Packages. We are proud

of our 56-year history of corporate

giving, supporting groups working for

progressive social change in various

arenas. We offered our contributions

to various hospitals, trusts and non-

profit organizations during the year.

Promoting Traditional Mela Culture

Packages Limited is an organization

which always looks forward to

arrange different events to promote

traditional activities within the

society. Women and Children Mela

is one of these activities which

Packages is organizing for the last

many years. The objective of this

event is to provide entertainment to

the family members of our employees

and the residents of our vicinity

keeping in view the cultural aspect of

our society. More than 1000 families

participate in this event every year

and enjoy the real taste of a “Mela”.

Rose Festival

Promotion of natural beauty always

remains at top priority in Packages

Limited. One of its example is the

most famous and colourful event,

“The Packages Rose Festival”. We

conduct this event in our garden

every year where there are more than

three hundred types of roses show

their beautiful colours to welcome

the distinguished guests from local

community, customers, vendors and

employees. A display of different

kinds of peacocks is an essential part

of this event where these beautiful

birds attract the audience especially

children by making arch of their

naturally colored wings.

Promoting Sports Activities

Promotion of sports always plays

a big role in our corporate social

responsibilities initiatives. To carry

out all these sports activities, we have

a complete sports department within

the Packages. Some of these activities

which aim to promote sports at grass

root level within the country are:

• JaffarMemorialInterSchool

Hockey Tournament

• BabarAliFoundationInter

School Football Tournament

Besides this, Packages do have

sports facilities for its employees as

well. Every year, inter departmental

tournament starts the sports year of

Packages and ends with the annual

sports day celebrations. These sports

activities also provide a platform to

the employees to become part of

the Packages Sports Teams which

represents the Company in different

sports competition.

Human CapitalEmployment Initiatives

Our greatest asset is our employees.

We are committed to attracting,

retaining, and developing the

highest quality and most dedicated

work force. So we strive to hire and

promote people on the basis of

their qualifications, performance,

and abilities and are determined

to provide equal opportunities to

our employees and to provide them

work environment free of any form of

illegal discrimination both direct and

indirect.

Trainings

Packages Limited has both local and

international training programs for

its employees. Employee training

needs are periodically reviewed,

various in-house and customized

training programs are arranged

for production, marketing, human

resource, supply management and

finance personnel.

Packages Limited is also recognized

as a training organization as it is

one of the platinum rated training

providers for ‘Association of

Chartered Accountants’ UK. We also

provide necessary apprenticeships

to industrial diploma holders in our

production departments.

Healthcare and Fitness facilities

The health and welfare of our

employees has always been a

matter of utmost importance and

significance at Packages. We provide

comprehensive medical coverage to

our executive employees and their

families in our medical facilities

i.e. an operation theatre, pathology

laboratory and a pharmacy. Company

has also established a Maternity &

Child Healthcare Centre near Kasur

to provide health care benefits to the

women and children of surrounding

areas.

The Company has also invested in

a sports complex for indoor games

such as Badminton, squash and Table

tennis etc and a gymnasium with

state of the art fitness equipment for

its employees.

44

Fair Price Shop

Packages Limited has also

established a fair price shop for its

employees to facilitate them in the

purchase of their grocery items.

Packages is spending a good amount

of money as subsidy on the pulses

for the workers. Fair Price shop is

also offering other general stores &

clothing items on no profit no loss

basis to employees. Workers may get

these items on monthly credit as well.

Scholarships

We offer merit scholarships to

the children of our employees to

appreciate their talent and promote

healthy competition in the form of

monitory reimbursements that vary

with the level of education.

Hajj Facility

Every year, Packages has the privilege

to send 10 of its employees for

Hajj through ballot. This includes 7

employees from workers staff and

3 from executive and management

staff. The Company bears all expenses

of these employees pertaining to this

religious offering.

tHe ceramic splendor of fine tile work – inspired by tHe exterior walls of tHe laHore fort.created by rabia ali kHan, 2013


45

Notice is hereby given that the 58th Annual General

Meeting of Packages Limited will be held on Tuesday, April

30, 2013 at 11.00 a.m. at the Beach Luxury Hotel, Moulvi

Tamizuddin Khan Road, Karachi to transact the following

ordinary business :-

1. To confirm the Minutes of the 57th Annual General

Meeting of the Company held on April 30, 2012.

2. To receive and adopt the Audited Financial

Statements of the Company for the year ended

December 31, 2012 together with the Directors’ and

Auditors’ Reports thereon.

3. To consider and approve the payment of cash

dividend for the year ended December 31, 2012 as

recommended by the Board of Directors -

a) to the preference share/convertible stock holder

(International Finance Corporation) at the rate

of Rs. 19 (10%) per preference share/convertible

stock of Rs. 190 in terms of the Subscription

Agreement between Packages Limited and

International Finance Corporation; and

b) to the ordinary shareholders at the rate of Rs.

4.50 (45%) per ordinary share of Rs. 10.

4. To appoint Auditors for the year 2013 and to fix their

remuneration.

By Order of the Board

Karachi Adi J. Cawasji

March 28, 2013 Company Secretary

Notes :

1. The Share Transfer Books of the Company will remain

closed from April 19, 2013 to April 30, 2013 (both days

inclusive) and the final dividend will be paid to the

shareholders whose names will appear in the Register

of Members on April 18, 2013.

2. A member entitled to attend and vote at the meeting

may appoint a proxy in writing to attend the meeting

and vote on the member’s behalf. A Proxy need not

be a member of the Company.

3. Duly completed forms of proxy must be deposited

with the Company Secretary at the Registered Office

of the Company at 4th Floor, The Forum, Suite #

416-422, G-20, Block 9, Khayaban-e-Jami, Clifton,

Karachi-75600 not later than 48 hours before the time

appointed for the meeting.

4. Shareholders (Non-CDC) are requested to promptly

notify the Company’s Registrar of any change in their

addresses and submit, if applicable to them, the Non-

deductionofZakatFormCZ-50withtheRegistrarof

the Company M/s FAMCO Associates (Pvt.) Limited,

1st Floor, State Life Building No.1-A, I. I. Chundrigar

Road, Karachi-74000. All the Shareholders holding

their shares through the CDC are requested to please

updatetheiraddressesandZakatstatuswiththeir

Participants. This will assist in the prompt receipt of

Dividend.

5. The Securities and Exchange Commission of

Pakistan has directed vide SRO 779 (I) 2011 dated

August 18, 2011 to issue dividend warrant only

crossed as “A/c Payee only” and should bear the

Computerized National Identity Card Number (CNIC)

of the registered member. Members, who have not

yet submitted photocopy of their valid CNIC are

requested to send the same at the earliest directly to

the Company’s Share Registrar M/s FAMCO Associates

(Pvt.) Limited, 1st Floor, State Life Building No.1-A, I.

I. Chundrigar Road, Karachi-74000.

6. As directed by the Securities and Exchange

Commission of Pakistan vide Circular No.18 of 2012

dated June 5, 2012, we give the shareholders the

opportunity to authorize the Company to directly

credit in their bank account the cash dividend, if

any, declared by the Company in the future. If the

shareholder wishes that the cash dividend, if declared

by the Company, be directly credited into his/her/its

bank account instead of issuing a dividend warrant,

please provide the following details :-

Title of Bank Account

Bank Account Number

Bank’s Name

Branch Name and Address

Cell number of Shareholder

Landline number of Shareholder

7. Any individual beneficial owner of the Central

Depository Company, entitled to vote at this

meeting, must bring his/her Computerized National

Identity Card (CNIC) with him/her to prove his/

her identity, and in case of proxy must enclose an

attested copy of his/her CNIC. The representatives

of corporate bodies should bring attested copy of

board of directors’ resolution/power of attorney and/

or all such documents required under Circular No.1

dated January 26, 2000 issued by the Securities and

Exchange Commission of Pakistan for the purpose.

8. Form of proxy is attached in the Annual Report.

notice of annual general meeting

46

a depiction of tHe elaborate wall art adorning tHe mausoleum of sHaH rukn-e-alam in multan.created by sHaista, 2005


47

The Board of Directors are pleased to submit their Annual Report along with the audited financial statements of the

Company for the year ended December 31, 2012.

Performance OutlookSignificant events impacting the Company

Despite challenging business environment prevalent

in the country, the Board of Directors of your Company

have signed an agreement on September 17, 2012 with

“Stora Enso OYJ Group” (Stora Enso) of Finland entering

into 50/50 joint venture in its 100% wholly owned

subsidiary “Bulleh Shah Packaging (Private) Limited”

[formerly “Bulleh Shah Paper Mill (Private) Limited”]

(‘BSPL’) to enable continuous growth and technical

development in the Paper & Paperboard segment. This

Joint Venture Agreement would enable greater focus on

Paper & Paperboard and Corrugated businesses which are

integrally linked and have different capital and technology

requirements as well as market focus as compared to

Packaging and Consumer Product businesses. It will also

enable access to Stora Enso’s technology as well as using

its platform for exports.

The Joint Venture covers Paper & Paperboard and

Corrugated businesses operational at Kasur Mills and

Karachi and will involve initial equity participation of Stora

Enso of 35% by way of subscription of right shares with

a commitment to increase the shareholding to 50% at a

later stage subject to certain conditions being met. The

agreed value for 100% of the joint venture company is USD

107.5 million on a cash and debt free basis with additional

equity to be subscribed by Stora Enso through right

shares in the joint venture company of USD 17.5 million

based on the financial results of H2-2012 and H1-2013.

Packages shall continue to hold minimum 50% ownership

and would be entitled to future proportionate profits of

the Joint Venture. Accordingly, the Company’s operations

have been divided into Continuing and Discontinued

Operations for financial reporting purposes.

Paper and Paperboard and Corrugated businesses have

been recognized as Discontinued Operations with respect

to Packages Limited as these will form part of the Joint

Venture.

The results of Continuing Operations include Folding

Cartons, Flexible Packaging and Consumer Products

Divisions that will continue to be part of Packages Limited

on a standalone basis.

directors’ report to tHe sHareHolders

Financial and Operational PerformanceRupees in million

2012 2011 Represented

Continuing Operations Net sales 11,745 11,386

EBITDA – operations 947 897Depreciation & amortization (350) (310)EBIT – operations 597 587Finance costs (528) (484)Otheroperatingincome/(expenses)–net 258 285Investment income 1,534 1,040Reversal of impairment / (impairment) charged on investments 361 (391)Earnings before tax 2,222 1,037Taxation (875) (876)Earnings after tax 1,347 161Basic earnings per share – Rupees 15.97 1.90 Discontinued Operations Operational loss after tax (1,057) (1,729)Loss after tax on re-measurement of assets of Disposal Group (3,002) -Loss after tax (4,059) (1,729)Basic loss per share – Rupees (48.10) (20.48)

48

The production statistics for the period under review along

with its comparison with the corresponding period are as

follows:

2012 2011

Consumer products produced - tons 8,698 9,145

Carton board & consumer products

converted - tons 27,807 30,488

Plastics all sorts converted - tons 13,594 12,845

Discontinued Operations

Paper & Paperboard and Corrugated businesses have

been recognized as Discontinued Operations with respect

to Packages Limited as these will form part of the Joint

Venture. Discontinued Operations have achieved external

sales of Rs. 8,709 million during the year 2012 as against

Rs. 7,602 million of 2011 representing 12% top line growth.

Operating results have also indicated improvement as

Discontinued Operations have sustained an Operational

Loss Before Tax of Rs. 999 million during 2012 as against

Operational Loss Before Tax of Rs. 2,417 million incurred

during 2011. This improvement is primarily attributable

to greater flexibility exercised after re-build of Paper

Machine (PM-6) in terms of production of high value

added products and energy management initiatives. The

Company is still facing energy shortages as well as unfair

competition in writing and printing paper segment from

imported paper that is being sold at dumping prices in

the local market. The Company is actively pursuing its

applications for fixation of anti-dumping duty and Import

Trade Price (ITP) with National Tariff Commission (NTC)

and the custom authorities to protect its products i.e.

writing and printing paper against unfair competition

offered by imported paper. To overcome the energy

shortage, the Company is at an advanced stage of placing

an order for a bio-mass based boiler.

Pursuant to recognition as Disposal Group, the

Management has recognized assets and liabilities of

Paper & Paperboard and Corrugated businesses as

‘Disposal group held for sale’ in terms of applicable

financial reporting framework and re-measured the

underlying assets and liabilities at the lower of carrying

amount and fair value less costs to sell at the date of held-

for-sale classification and consequently has estimated a

one-off non-cash charge of Rs. 3,002 million net of taxes

in these financial statements for the year ended December

31, 2012.

The Management is fully confident that the operating

results of Paper & Paperboard and Corrugated businesses

will substantially improve through joint efforts of Stora

Enso and local team. The Joint Venture will provide

paperboard and packaging products to key local and

Continuing Operations

In 2012, Continuing operations have achieved net sales of Rs. 11,745 million against net sales of Rs. 11,386 million for the year 2011 representing sales growth of 3%. This growth has been marginal due to unfortunate fire incident that occurred towards the end of 2011 in Consumer Products Division and adversely impacted operations of the Division during the first half of 2012. Moreover, the consumer industry has also shown stable business volumes in recent times due to inflationary pressures, energy situation and product variant rationalization. Operations have generated EBITDA of Rs. 947 million during 2012 against Rs. 897 million of 2011 representing an increase of Rs. 50 million despite increase in energy costs by Rs. 149 million.

The Company has also recognized reversal of impairment amounting to Rs. 355 million and Rs. 6 million during 2012 on its investments held in IGI Insurance Limited and IGI Investment Bank Limited respectively on the basis of recovery in recoverable amount.

Investment income has increased by Rs. 494 million during 2012 over 2011 values that is indicative of improved operational performance of the investee companies.

As part of its efforts to remain abreast with improved technological developments in the Packaging business, the Company has invested in a New Rotogravure Machine for its Flexible Packaging Business with a project cost of Rs. 326 million. The Machine has started commercial operations and is serving growing needs of the market. On the Folding Cartons side, the Company has also invested in a New Cutting & Creasing machine that has commenced commercial operations during 1Q 2013 subsequent to year-end. Packaging operations are fully geared up to meet enhanced customer requirements and are also actively pursuing cost control measures to improve bottom line results.

Consumer Products Division has registered sales of Rs. 2,064 million during 2012 as compared to Rs. 1,965 million of 2011 representing sales growth of 5% despite the unfortunate fire incident that occurred towards the end of 2011 and adversely impacted operations of the Division during 1H2012. The Company has actively pursued on re-commencement of operations and all the critical machines including Facial Tissue machines, Toilet Roll machines, Table Napkin machines, Paper Cup and N-Fold machines have been installed and have commenced commercial operations during second half of the year 2012. The Company has also rigorously followed cost control measures within the Division and has managed to improve its operating earnings by Rs. 146 million in 2012. The Company has also substantially regained its market share after re-commencement of own conversion operations through its rigorous marketing strategies towards the end

of 2012.


49

international customers in the fast-growing Pakistani

market. The Joint Venture is expected to commence its

operations during 2Q 2013 upon completion of necessary

regulatory approvals.

As part of the Agreement, both parties are committed to a

substantial USD 135 million investment programme during

2013 and 2014 to further develop the business. To finance

this investment program, Packages shall contribute USD

18.5 million to the Joint Venture and these investments

including a new alternate fuel based power plant will

further improve the product quality, competitiveness and

profitability of the operations. Annual production capacity

of the Joint Venture is expected to be 360,000 tons of paper

board upon completion of investments.

The production statistics for the period under review along

with its comparison with the corresponding period are as

follows:

2012 2011

Paper & paperboard produced - tons 139,846 136,682

Paper & paperboard converted - tons 79,589 79,828

During the current year, the Company has also decided to

close down its Paper & Paperboard operations in Lahore,

accordingly, these operations have also been recognized

as a Discontinued Operation. These operations incurred

Net Loss of Rs. 211 million during the year 2012 including

closure costs of Rs. 91 million incurred in respect of

Voluntary Separation Scheme (VSS) offered to outgoing

employees of these operations.

Financial ManagementThe Company has an effective Cash Flow Management

System in place whereby cash inflows and outflows are

projected on regular basis and rigorously monitored.

Working capital requirements are planned to be financed

through efficient management of trade receivables,

payables and inventory levels. Business unit managers are

assigned working capital targets which are being regularly

monitored.

The investment portfolio of the Company is fairly

diversified, as reflected by equity participation in Nestle

Pakistan Limited, Tri-Pack Films Limited, Tetra Pak

Pakistan Limited, DIC Pakistan Limited and Packages

Lanka (Private) Limited. During the year 2012, the

Company has recognized reversal of impairment

amounting to Rs. 355 million and Rs. 6 million on its

investments held in IGI Insurance Limited and IGI

Investment Bank Limited respectively on the basis of

recovery in recoverable amount.

The Board is satisfied that there are no short or long term

financial constraints including access to credit and a

strong balance sheet with December 2012 long term debt :

equity ratio at 13:87.

Risk Mitigation Credit Risk

All financial assets of the Company, except cash in

hand, are subject to credit risk. The Company believes

that it is not exposed to major concentration of credit

risk. Exposure is managed through application of credit

limits to its customers secured by and diversification of

investment portfolio placed with ‘A’ ranked banks and

financial institutions.

Liquidity Risk

Prudent liquidity risk management ensures availability of

sufficient funds for meeting contractual commitments. The

Company’s fund management strategy aims at managing

liquidity risk through internal cash generation and

committed credit lines with financial institutions.

Invoiced Sales(Rupees in Million)

2012*2011*20102009200820070

5,000

10,000

15,000

20,000

25,000

10,5

40

14,3

01 16,5

33

13,7

97

13,8

71

21,8

37


Property, Plant and Equipment (Cost)(Rupees in Million)

2012*201120102009200820070

5,000

10,000

15,000

20,000

25,000

30,000

23,6

90 25,7

90

26,8

87 28,4

72

9,27

5

27,7

49


50

Interest Rate Risk

Variable rate long term financing is hedged against

interest rate risk by holding “prepayment option”, which

can be exercised upon any adverse movement in the

underlying interest rates.

Foreign Exchange Risk

Foreign currency risk arises mainly where receivables and

payables exist due to transactions in foreign currencies.

The Company is mainly exposed to short-term USD / PKR

and Euro / PKR parity on its import of raw materials and

plant and machinery.

Capital Management

The Company’s policy is to maintain a strong capital base

so as to maintain investor, creditor and market confidence

and to sustain future development of the business. There

were no changes to the Company’s approach to capital

management during the year and the Company is not

subject to externally imposed capital requirements.

Contribution to National Exchequer

Your Company is a noteworthy contributor to the national

economy. Your Company has contributed Rs. 2,133 million

during the year 2012 to the national exchequer on account

of sales tax, income tax, import duties and statutory levies.

Environmental Health and Safety In 2012, your Company adopted a systematic approach for

the way it manages environment, health & safety (EHS)

in the organization in the form of Integrated Management

System. During the year, the Kasur Plant has managed to

obtain the following certifications

• ISO14001

• OHSAS18001

• QMS9001

• ISO22000

The Lahore Plant got re-certifications for ISO14001 and

HACCP and also got OHSAS 18001 certification last year.

Occupational Health and Safety remain the key focus

areas throughout the year including fire safety, road

safety, and behavior based safety, people empowerment

& workforce involvement in safety issues and training &

development. In 2012, the Company has installed fire

detection system, security and surveillance cameras across

the manufacturing facility along with modern control room

to monitor the fire safety and security surveillance.

Your Company has always strived to remain at par with

changing times and technologies. In 2012, the Company

Debt Equity Ratio(Percentage)

2012201120102009200820070

20

40

60

80

100

60

56

75

78

87

77

40

44

25

23 22

13

Debt Equity

Working Capital(Rupees in Million)

2012*201120102009200820070

1,000

2,000

3,000

4,000

5,000

6,000

3,25

9

5,05

0

5,65

8

5,87

2

3,10

4

5,11

2

36%

42%

40%

28%

43%

26%

Working Capital Working Capital as % to Sales



51

took the initiative to replace regular street lights with

solar induction lights each with a backup of 10 hours. It

has also transitioned from high wattage traditional lights

with modern technology lighting system comprising of

LED/SMD and Induction. Moreover, the Company has also

undergone energy audits for steam, water and compressed

air to reduce energy consumption.

During the year, your Company has been honored with the

following awards

• CertificateofappreciationforBestEnvironmental

Performance (2011-2012)

• CSRBusinessExcellenceAwards2012:Certificateof

Excellence for remarkable efforts in CSR Activities in

Pakistan, March 28, 2012

• 9thAnnualEnvironmentExcellenceAwards2012:

Excellence in Services and Performance, July 12, 2012

• NFEHFireSafetyawards2012:ExcellenceinServices

and Performance - 13th December, 2012- Karachi

Packages moved one step ahead in environmental

management as it Initiated a recovered fiber project with

the help of IFC (World Bank Group) in which recycled and

used paper is collected from all over Pakistan and brought

to our factory or centers for processing.

Campaigns are an integral part of the Environmental

Health and Safety initiatives; significant Campaigns of

2012 include the following;

1. IMS Campaign:

2. Dengue awareness and prevention Campaign

3. Defensive Driving and Bike Safety Campaign

4. Fork lifter and industrial vehicle safety Campaign

Training is considered as mandatory part of any

occupational health and safety program. During the year

2012, your Company has arranged several trainings for its

human capital including;

• Hazardidentification

• Behaviorbased&firesafety

• Incidentreporting&investigation

• Safetyofhighpressurecylinders

• Fireriskassessment

• Slip/tripandfall

Encouraging to Go Green

Your Company promotes responsible use of natural

resources through sustainable procurement and green

work practices. Having started the environmental system

in 2007, your Company is striving hard to reduce carbon

foot print since then by taking various environmental

initiatives.

The Company’s programs inter-alia include:

• Greenoffice

• Improvedenergyefficiencyinordertomitigategreen

house emissions

• Reducedwaste,properwastesegregationand

disposal

• Greenprocurement

• Numerictargetinordertomonitorachievementof

targets

• Recoveredfiberproject

• Reusingwasteininsulationmaterialandsubstitution

of chipboards

• Environmentalawarenesscampaigns

• Usageofwebtoolsinsteadofpaper

• Solarstreetlights

• UsageofVFDsinallmajordevices

Quality ManagementIn the current business scenario, while the resources are

limited and expensive, goals are high and challenging.

Your Company in its ‘continuous improvement’

embarked upon Total Productive Maintenance (‘TPM’)

Implementation in the year 2010. During the current

year, this implementation has been extended across all

business processes and such execution has given ground

breaking results in all areas leading to new spirit and

motivation in all departments with goal congruency.

There is reduction in machine deterioration with lesser

downtimes and unprecedented performances, reduced

wastages, efficient housekeeping practices, decreased

changeover times and increased safety levels at

Current & Quick Ratio

2012*201120102009200820070

1

2

3

4

5

2.46

1.23

4.58

2.57

1.57

3.52

0.97

0.43

1.721.57

0.96

1.03

Current Ratio Quick Ratio


52

production facilities. On the employee front, a definite

skill enhancement has occurred with daily awareness of

solutions to problems.

Your Company is certified for the quality management

system ISO 9001:2008 Edition. The quality assurance

initiatives for the year 2012 were not only a source of

inspiration for all our employees but also resulted in

reduction in process waste and cost.

The management attributes high value to customer

relations and always endeavours to meet top class quality

and work place practices. In line with the management’s

approach, the Company has been through a number of

third party and customer audits in 2012.

Asian Flexo Technological Award

Your Company has always believed in maximizing

customer satisfaction and maintaining high quality

levels which is also evident from its business policy.

In an effort to test the ability and quality of products

offered, flexographic process from Business Unit Flexible

competed for Asian Flexo Technological Award 2011.

A sample CRISPO cooking oil packaging was sent for

testing against 350 other competitors. Packages Limited

was not only the first organization to have represented

Pakistan at this forum but also made the country proud

by securing bronze position in mid-web flexible (films)

category in the flexographic printing process for achieving

excellence in quality and commercial printing.

The quest for supreme productivity excellence does not

end with these achievements, rather these results are

acting as appetizer to the promised main course, which is

yet to come.

Corporate Social ResponsibilityYour Company has distinguished itself as a good

neighbor, not only has the Company consistently

delivered outstanding returns to its shareholders, it has

also worked hard to be an employer of choice, to be a

catalyst for the social and economic development of

the communities in which it operates, and to minimize

the environmental impact. The Company’s CSR policy

is driven by the imperative need to positively touch the

lives of its stakeholders, with special emphasis on the

indigent communities of the society. On CSR front, the

management continued its focus on education, healthcare,

skill development, environmental protection and societal

welfare during the current year.

In 2012 your Company also undertook the remodeling

of government schools and building a Teacher’s Training

Centre in the vicinity of Kasur. The Kasur city underwent

a facelift after it created foreign investment opportunities

and job opportunities for the locals.

Retirement FundsYour Company takes care of its employees not only during

the time of their employment with the Company but also

offers them retirement benefits so that they continue to

meet their needs afterwards. There are three retirement

funds currently being operated by the Company namely

Provident Fund, Gratuity Fund and Pension Fund.

The value of investments of Provident, Gratuity and

Pension funds based on their audited accounts as on

December 31, 2012 were the following:

Provident Fund Rs. 1,100.593 million

Gratuity Fund Rs. 341.022 million

Pension Fund Rs. 1,005.960 million

In a meeting held on December 26, 2012, the Board of

Trustees of the Pension Fund have decided to convert

the existing defined benefit plan to defined contribution

plan for all its employees active as on December 31, 2012

with effect from January 1, 2013 subject to such regulatory

approvals as are necessary in the circumstances. The

proposed scheme has been subsequently approved by the

taxation authorities on February 22, 2013 and respective

employees consent with the proposed scheme has also

been obtained in the subsequent period. There has been

no effect of such conversion on the pensioner’s appearing

in pensioner’s list of the Fund as of December 31, 2012.

Such conversion has been accounted for in accordance

with the provisions of relevant financial reporting

framework.

AppropriationDuring the year 2012, Company’s Continuing Operations

have achieved positive results. These results have been

augmented with significant increase in dividend income

during the year with a resultant Earning per Share of

Rs. 15.97 on Continuing Operations.


53

Operating performance of Discontinued Operations have

also improved during the year 2012 compared to the last

year; yet these still ended up in a Loss After Tax of

Rs. 4,059 million due to a one-off impairment charge of

Rs. 3,002 million net of taxes with a resultant Loss per

Share of Rs. 48.10 on Discontinued Operations.

These factors resulted into net loss after tax of Rs. 2,711

million for the year ended December 31, 2012. However,

in view of the continuous support of shareholders during

this difficult period, the Board of Directors of the Company

has recommended cash dividend of 45 percent (i.e. Rs. 4.5

per share) accordingly, following appropriations have been

made:


Loss after tax for the year 2012 after

appropriation of preference dividend/

return of Rs. 412.050 M (2,711,465)

Un-appropriated profit brought forward 42,687

(2,668,778)

Transfer from General Reserve 3,100,000

Available for appropriation 431,222

Cash Dividend (379,708)

To be carried forward to 2013 51,514

AuditorsThe present auditors M/s A.F Ferguson & Co.,

Chartered Accountants retire and offer themselves for

reappointment. They have confirmed achieving satisfactory

rating by the Institute of Chartered Accountants of

Pakistan (ICAP) and compliance with the Guidelines on

the Code of Ethics of the International Federation of

Accountants (IFAC) as adopted by ICAP.

As suggested by the Audit Committee, the Board of

Directors has recommended their reappointment as

Auditors of the Company for the year ending December 31,

2013, at a fee to be mutually agreed.

Compliance with the Code of Corporate GovernanceThe requirements of the Code of Corporate Governance

set out by the Karachi, Lahore and Islamabad Stock

Exchanges in their Listing Regulations, relevant for the

year ended December 31, 2012 have been adopted by the

Company and have been duly complied with. A Statement

to this effect is annexed to the Report.

Material ChangesThere have been no material changes since December

31, 2012 and the Company has not entered into any

commitment, which would affect its financial position

at the date except for those mentioned in the audited

financial statements of the Company for the year ended

December 31, 2012.

Changes in the Composition of Board and its Sub-CommitteesDuring the year 2012, a casual vacancy was created on the

Board of Directors of the Company on October 20, 2012

with the resignation of Mr. Matti Ilmari Naaka, a nominee

of Stora Enso. Mr. Mats Nordlander was nominated by

Stora Enso on the Board of Directors of the Company in

his place who will hold office for the remainder of the term

of Mr. Matti Ilmari Naaka.

The Board also resolved to change composition of its

Sub-Committees namely Audit Committee and Human

Resource and Remuneration (HR&R) Committee in the

following manner;

Board Composition

Executive Directors – 30%

Non Executive Directors – 70%

54

Audit Committee

In view of the requirements of the revised Code of

Corporate Governance 2012, it has been decided to

nominate an Independent Director as Chairman of the

Audit Committee. Consequently, Mr. Shahid Aziz Siddiqui,

an independent director, has been nominated as Chairman

of the Audit Committee in place of Mr. Shamim Ahmad

Khan, a Non-Executive Director. Mr. Shamim Ahmad Khan

would continue serving the Audit Committee as a Non-

Executive Director in place of Mr. Wazir Ali Khoja.

Human Resource and Remuneration (HR&R) Committee

“Remuneration and Appointments Committee” was

renamed to “Human Resource and Remuneration

(HR&R) Committee” with its terms of reference amended

in accordance with the Code. Number of Committee

members increased from three to five with the induction

of Mr. Shahid Aziz Siddiqui and Mr. Shamim Ahmad Khan

as Independent Director and Non-Executive Director

respectively.

The Board welcomes new members and wishes to place

on record its appreciation of the services rendered by

outgoing members during the tenure of their office.

Meetings of Board of DirectorsDuring the year 2012, six Board meetings were held and

the number of meetings attended by each Director is given

hereunder:-

Name of Director No. of meetings

attended

Mr. Towfiq Habib Chinoy (Chairman) 6

Syed Hyder Ali (Chief Executive) 6

Mr. Khalid Yacob 6

Mr. Mats Nordlander

(Appointed on October 20, 2012) Nil

Mr. Matti Ilmari Naakka

(Resigned on October 20, 2012) 1

Mr. Muhammad Aurangzeb 3

Mr. Shahid Aziz Siddiqui 5

Mr. Shamim Ahmad Khan 6

Syed Aslam Mehdi 6

Syed Shahid Ali 1

Mr. Wazir Ali Khoja 4

Mr. Ali Aslam

(Alternate to Mr. Matti Ilmari Naakka) 1

Leave of absence was granted to the Directors who could

not attend the Board meetings.

Audit CommitteeAn Audit Committee of the Board has been in existence

since the enforcement of the Code of Corporate

Governance, which comprises of two Independent

Directors (including its Chairman), three Non-Executive

and one Executive Director.

During the year, four (4) meetings of the Audit Committee

were held. The attendance of each Member is given

hereunder:

Name of member No. of meetings

attended

Mr. Shahid Aziz Siddiqui - Chairman

(Appointed on August 25,2012) Nil

Mr. Mats Nordlander

(Appointed on October 20, 2012) Nil

Mr. Matti Ilmari Naakka

(Resigned on October 20, 2012) 1

Mr. Muhammad Aurangzeb 3

Mr. Shamim Ahmad Khan 4

Syed Aslam Mehdi 2

Syed Shahid Ali 1

Mr. Wazir Ali Khoja

(Resigned on August 25, 2012) 2

Mr. Ali Aslam

(Alternate to Mr. Matti Ilmari Naakka) 1

Leave of absence was granted to the Members who could

not attend the Meetings of the Audit Committee.

The Audit Committee has its terms of reference which were

determined by the Board of Directors in accordance with

the guidelines provided in the Listing Regulations and

Code of Corporate Governance.


55

Human Resource and Remuneration (HR&R) CommitteeDuring the year, two (2) meetings of the Human Resource

and Remuneration (HR&R) Committee were held. The

attendance of each Member is given hereunder:

Name of member No. of meetings

attended

Mr. Towfiq Habib Chinoy - Chairman

(Non- Executive Director) 2

Syed Hyder Ali

(Executive Director) 2

Syed Aslam Mehdi

(Executive Director) 2

Mr. Shahid Aziz Siddiqui

(Independent Director)

(Appointed on August 25, 2012) 1

Mr. Shamim Ahmad Khan

(Non- Executive Director)

(Appointed on August 25, 2012) 1

Ms. Asma Javed

(Secretary) 2

Corporate and Financial Reporting Framework

• Thefinancialstatementstogetherwiththenotes

thereon have been drawn up by the management in

conformity with The Companies Ordinance, 1984.

These Statements present fairly the Company’s state

of affairs, the results of its operations, cash flow and

changes in equity.

• Properbooksofaccounthavebeenmaintainedbythe

Company.

• Appropriateaccountingpolicieshavebeen

consistently applied in the preparation of financial

statements and accounting estimates are based on

reasonable and prudent judgment.

• InternationalAccountingStandards,asapplicablein

Pakistan, have been followed in the preparation of the

financial statements.

• Thesystemofinternalcontrolissoundindesignand

has been effectively implemented and monitored and

is being continuously reviewed by the internal audit

function.

• TherearenodoubtsupontheCompany’sabilityto

continue as a going concern.

• TherehasbeennomaterialdeparturefromtheBest

Practices of Corporate Governance, as detailed in the

Listing Regulations.

• Thekeyoperatingandfinancialdataforthelastten

years is annexed.

Trading of Shares by Chief Executive, Directors, Chief

Financial Officer, Company Secretary, their spouses and

minor children:

Purchase of Shares: No. of shares

Chief Executive Officer 100,000

Director–SyedAslamMehdi 5,000

Chief Financial Officer Nil

Company Secretary Nil

Other Executives 10,136

Spouses Nil

Sale of Shares:

Directors–Mr.TowfiqHabibChinoy 200,000

Syed Shahid Ali 550,000

Pattern of ShareholdingA statement of the pattern of shareholding of certain class

of shareholders as at December 31, 2012, whose disclosure

is required under the reporting framework, is included in

the annexed shareholders’ information.

The Directors, CEO, CFO, Company Secretary, Head

of Internal Audit and other executive employees and

their spouses or minor children did not carry out any

trade in the shares of the Company during the year

as communicated to the Company, except as noted

above. For the purpose of this regulation, executives are

considered as those employees having annual basic salary

of more than Rs. 500,000/-; being the threshold for the year

2012 as set by the Board.

56

Future Outlook In respect of Continuing Operations, Consumer Products

Division is expected to re-gain its market share after re-

commencement of production operations. With start-up

of New Rotogravure Machine by the current year-end,

the Company is likely to improve its market share in the

Flexible Packaging business. Despite rising raw material

prices, electricity and gas shortages, your Company is

improving shareholder’s value through tight cost control,

product and process optimization, price rationalization

and efficient working capital management.

In respect of Paper & Paperboard and Corrugated Boxes

businesses, the management believes that the New Joint

Venture shall bring considerable value to its shareholders

and will meet Stora Enso’s and Packages’ joint return on

investment targets.

The management remains confident that the economy

would improve in the future and the Company shall be

able to maintain its market leadership.

The management continues to believe that your Company

is well equipped to take advantage of the industry growth

as a premier packaging and paper & board supplier

provided the macroeconomic indicators move in the

positive direction. The Company’s strength lies in its

vertically integrated production facilities that can convert

pulp into a final finished product and your Company can

cater all the packaging needs of its customers.

It is expected that the trend of shifting from unpacked to

packed products would gain accelerated momentum with

changing life style, urbanization and a growing middle

class.

Company’s Staff and CustomersThe management is thankful to the Company’s customers

and consumers for their continuing confidence in its

products and services as this is providing confidence in

the Company’s growth initiatives.

The management also wants to express its gratitude to all

the Company’s employees who have worked tirelessly and

delivered outstanding performance in the backdrop of the

economic recession and a difficult business situation. We

appreciate their hard work, loyalty and dedication.

Towfiq Habib Chinoy Syed Hyder AliChairman Chief Executive & Managing Director

Karachi, March 18, 2013 Karachi, March 18, 2013


57

Registered Office4th Floor, The Forum

Suite # 416-422, G-20, Block 9

Khayaban-e-Jami, Clifton

Karachi-75600

Tel. # 92 21 35831618 / 35831664 / 35833011,

35874047 - 49

Fax # 92 21 35860251

Shares Registrar FAMCO Associates (Pvt.) Ltd

1st Floor, State Life Building No.1-A

I. I. Chundrigar Road

Karachi-74000

Tel. # 92 21 32425467, 32427012, 32426597,

32475604, 32420755

Fax # 92 21 32426752

Listing on Stock ExchangesPackages equity shares are listed on Karachi, Lahore and

Islamabad Stock Exchanges.

Listing FeesThe annual listing fee for the financial year 2012-13 has

been paid to all the three stock exchanges within the

prescribed time limit.

Stock CodeThe stock code for dealing in equity shares of Packages at

KSE, LSE and ISE is PKGS.

Shares RegistrarPackages’ shares department is operated by FAMCO

Associates (Pvt.) Ltd and serves about 4,050 shareholders.

It is managed by a well-experienced team of professionals

and is equipped with the necessary infrastructure in terms

of computer facilities and comprehensive set of systems

and procedures for conducting the Registration function.

The Shares Registrar has online connectivity with Central

Depository Company of Pakistan Limited. It undertakes

activities pertaining to dematerialization of shares, share

transfers, transmissions, issue of duplicate/re-validated

dividend warrants, issue of duplicate/ replaced share

certificates, change of address and other related matters.

For assistance, shareholders may contact either the

Registered Office or the Shares Registrar.

Contact persons:Mr. Rafique Khatri

Tel. # 92 21 35831618, 35831664, 35833011

Fax # 92 21 35860251

Mr. Ovais Khan

Tel. # 92 21 32425467, 32427012, 32426597,

32475604, 32420755

Fax # 92 21 32426752

sHareHolders’ information

Break-up Value per Ordinary Share(Rupees)

2012201120102009200820070

50

100

150

200

250

300

350

400

247.

65

192.

85

258.

49

331.

15

346.

65

300.

12

Market Value per Ordinary Share(Rupees)

2012201120102009200820070

50

100

150

200

250

300

350

400

363.

80

81.1

9

144.

00

82.7

2

151.

16

128.

61

58

Service StandardsPackages has always endeavored to provide investors with prompt services. Listed below are various investor services and

the maximum time limits set for their execution:

For requests received through post Over the counter

Transfer of shares 30 days after receipt 30 days after receipt

Transmission of shares 30 days after receipt 30 days after receipt

Issue of duplicate share certificates 30 days after receipt 30 days after receipt

Issue of duplicate dividend warrants 5 days after receipt 5 days after receipt

Issue of revalidated dividend warrants 5 days after receipt 5 days after receipt

Change of address 2 days after receipt 15 minutes

Well qualified personnel of the Shares Registrar have been entrusted with the responsibility of ensuring that services are

rendered within the set time limits are rendered within the set time limits.

Statutory Compliance During the year, the Company has complied with all

applicable provisions, filed all returns/ forms and

furnished all the relevant particulars as required under

The Companies Ordinance, 1984 and allied rules, the

Securities and Exchange Commission of Pakistan (SECP)

Regulations and the listing requirements.

Dematerialization of SharesThe equity shares of the Company are under the

dematerialization category. As of date 71.61% of the equity

shares of the Company have been dematerialized by the

shareholders.

Dividend AnnouncementThe board of directors of the Company has recommended

for the financial year ended December 31, 2012 payment of

cash dividend as follows -

a) to the preference share/convertible stock holder

(International Finance Corporation) at the rate of

Rs. 19.00 (10%) per preference share/convertible

stock of Rs. 190.00 in terms of the Subscription

Agreement between Packages Limited and

International Finance Corporation (2011: Rs. 19.00

(10%) per preference share/convertible stock of Rs.

190.00).

b) to the ordinary shareholders at the rate of 45%

(Rs. 4.50 per ordinary share of Rs. 10.00) subject

to approval by the ordinary shareholders of the

Company at the Annual General Meeting (2011:

cash dividend 15%).

Share Price Movement(Share Price on the KSE (Rupees / Share))

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0

20

40

60

80

100

120

140

160

180

77

8389 87

110105 105 102

106

126

166 168162

78 7882

96 94 96 96 97

120

150 150

LowestHighest

Trading Volume(Volume of shares traded on the KSE (in thousand))

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

153289 683

2,105

813

2,169

344

697

2,103

2,050

1,337

3,967


59

a remarkable art piece denoting tHe eternal allure of tHe laHore fort.created by moHammad umar, n.d.

60

Book Closure DatesThe Register of Members and Share Transfer Books of the Company will remain closed from April 19, 2013 to April 30, 2013 both days inclusive.

Dividend RemittancePreference dividend/return will be paid to the preference/convertible stockholder prior to payment of ordinary dividend to the ordinary shareholders.

Ordinary dividend declared and approved at the Annual General Meeting will be paid well before the statutory time limit of 30 days:

(i) For shares held in physical form: to shareholders whose names appear in the Register of Members of the Company after entertaining all requests for transfer of shares lodged with the Company on or before the book closure date.

(ii) For shares held in electronic form: to shareholders whose names appear in the statement of beneficial ownership furnished by CDC as at end of business on book closure date.

Withholding of Tax & Zakat on Ordinary Dividend As per the provisions of the Income Tax Ordinance, 2001, Income Tax is deductible at source by the Company at the rate of 10% wherever applicable.

Zakatisalsodeductibleatsourcefromtheordinarydividend at the rate of 2.5% of the face value of the share, other than corporate holders or individuals who have provided an undertaking for non-deduction.

Dividend WarrantsCash dividends are paid through dividend warrants addressed to the ordinary shareholders whose names appear in the Register of Shareholders at the date of book closure. Ordinary shareholders are requested to deposit those warrants into their bank accounts, at their earliest, thus helping the Company to clear the unclaimed dividend account.

Investors’ GrievancesTo date none of the investors or shareholders has filed any letter of complaint against any service provided by the Company to its shareholders.

Legal ProceedingsNo case has ever been filed by shareholders against the Company for non-receipt of shares/refund.

General Meetings & Voting RightsPursuant to section 158 of The Companies Ordinance, 1984, Packages Limited holds a General Meeting of shareholders at least once a year. Every shareholder has a right to attend the General Meeting. The notice of such meeting is sent to all the shareholders at least 21 days before the meeting and also advertised in at least one English and one Urdu newspaper having circulation in Karachi, Lahore and Islamabad.

Shareholders having holding of at least 10% of voting rights may also apply to the board of directors to call for meeting of shareholders, and if board does not take action on such application within 21 days, the shareholders may themselves call the meeting.

All ordinary shares issued by the Company carry equal voting rights. Generally, matters at the general meetings are decided by a show of hands in the first instance. Voting by show of hands operates on the principle of “One Member-One Vote”. If majority of shareholders raise their hands in favor of a particular resolution, it is taken as passed, unless a poll is demanded.

Since the fundamental voting principle in the Company is “One Share-One Vote”, voting takes place by a poll, if demanded. On a poll being taken, the decision arrived by poll is final, overruling any decision taken on a show of hands.

ProxiesPursuant to Section 161 of The Companies Ordinance, 1984 and according to the Memorandum and Articles of Association of the Company, every shareholder of the Company who is entitled to attend and vote at a general meeting of the Company can appoint another person as his/her proxy to attend and vote instead of him/her. Every notice calling a general meeting of the Company contains a statement that a shareholder entitled to attend and vote is entitled to appoint a proxy. A proxy may not be a member of the Company.

The instrument appointing a proxy (duly signed by the shareholder appointing that proxy) should be deposited at the office of the Company not less than forty-eight hours before the meeting.

Web Presence Updated information regarding the Company can be accessed at Packages website, www.packages.com.pk. The website contains the latest financial results of the Company together with Company’s profile, the corporate philosophy and major products.


61

1 100 2,027 36,330

101 500 713 206,138

501 1,000 343 273,278

1,001 5,000 560 1,344,659

5,001 10,000 135 977,971

10,001 15,000 59 748,681

15,001 20,000 30 542,450

20,001 25,000 25 569,455

25,001 30,000 18 499,590

30,001 35,000 10 327,577

35,001 40,000 12 452,496

40,001 45,000 13 554,796

45,001 50,000 12 571,907

50,001 55,000 4 208,677

55,001 60,000 5 283,555

60,001 65,000 2 124,167

65,001 70,000 3 201,332

70,001 75,000 3 217,047

75,001 80,000 1 76,413

80,001 85,000 1 81,088

85,001 90,000 1 88,956

90,001 95,000 5 460,176

95,001 100,000 2 195,016

100,001 105,000 2 204,425

105,001 110,000 1 109,391

110,001 115,000 3 340,390

125,001 130,000 3 383,570

130,001 135,000 1 131,851

145,001 150,000 1 149,916

150,001 155,000 3 453,735

155,001 160,000 3 477,097

160,001 165,000 2 323,733

165,001 170,000 1 170,000

180,001 185,000 3 546,473

195,001 200,000 2 395,584

205,001 210,000 1 206,609

210,001 215,000 2 421,901

220,001 225,000 1 221,210

265,001 270,000 2 533,636

270,001 275,000 1 273,000

275,001 280,000 2 555,824

285,001 290,000 1 290,000

300,001 305,000 1 304,718

305,001 310,000 1 307,820

405,001 410,000 1 408,745

410,001 415,000 1 414,629

415,001 420,000 1 419,673

440,001 445,000 1 440,806

495,001 500,000 1 500,000

500,001 505,000 1 502,378

510,001 515,000 1 510,779

530,001 535,000 1 533,853

550,001 555,000 1 551,009

640,001 645,000 1 641,608

820,001 825,000 1 821,714

830,001 835,000 1 831,867

860,001 865,000 1 864,887

990,001 995,000 1 990,641

1,190,001 1,195,000 1 1,193,010

1,195,001 1,200,000 1 1,198,668

1,575,001 1,580,000 1 1,579,979

1,725,001 1,730,000 1 1,727,653

1,790,001 1,795,000 1 1,791,159

2,185,001 2,190,000 1 2,187,175

2,665,001 2,670,000 1 2,667,373

3,095,001 3,100,000 1 3,097,030

3,160,001 3,165,000 1 3,160,607

3,255,001 3,260,000 1 3,256,676

3,265,001 3,270,000 1 3,269,663

3,915,001 3,920,000 1 3,917,505

4,575,001 4,580,000 1 4,578,528

5,395,001 5,400,000 1 5,396,650

21,080,001 21,085,000 1 21,082,601

TOTAL 4,050 84,379,504

Shareholding Numbers of Total shares From To Shareholders held

Shareholding Numbers of Total shares From To Shareholders held

pattern of sHareHoldingThe shareholding pattern of the equity share capital of the Company as at December 31, 2012 is as follows:

62

Number of Number ofShareholders’ category shareholders shares held

i. Associated Companies, Undertakings and Related Parties (name wise details)

Gurmani Foundation 1 1,198,668

IGI Insurance Limited 1 21,082,601

Jubilee Life Insurance Company Limited 1 104,401

Babar Ali Foundation 1 3,097,030

Packages Limited Employees Gratuity Fund 2 104,494

Packages Limited Employees Provident Fund 2 2,067,893

Packages Limited Management Staff Pension Fund 2 660,036

Total : 10 28,315,123

ii. Mutual Funds (name wise details)

CDC - Trustee ABL Stock Fund 1 94,500

CDC - Trustee AKD Index Tracker Fund 1 6,917

CDC - Trustee AL Meezan Mutual Fund 1 502,378

CDC - Trustee JS Pension Savings Fund - Equity Account 1 7,000

CDC - Trustee Meezan Balanced Fund 1 180,473

CDC - Trustee Meezan Islamic Fund 1 1,727,653

CDC - Trustee Meezan Tahaffuz Pension Fund - Equity Sub Fund 1 131,851

CDC - Trustee NIT-Equity Market Opportunity Fund 1 21,482

CDC - Trustee UBL Sharia Stock Fund 1 273,000

CDC - Trustee United Stock Advantage Fund 1 500,000

MC FSL - Trustee JS Growth Fund 1 90,500

MCBFSL - Trustee ABL AMC Capital Protected Fund 1 10,000

MCBFSL- Trustee UIRSF-Equity Sub Fund 1 17,000

MCBFSL- Trustee URSF-Equity Sub Fund 1 20,000

National Bank Of Pakistan-Trustee Department NI(U)T Fund 1 4,578,528

Total : 15 8,161,282

iii. Directors and their spouse(s) and minor children (name wise details)

Khalid Yacob 1 1,023

Muhammad Aurangzeb 1 500

Shamim Ahmad Khan 1 603

Syed Aslam Mehdi 1 9,781

Syed Hyder Ali 2 2,287,175

Syed Shahid Ali 1 290,000

Towfiq Habib Chinoy 1 20,071

Total : 8 2,609,153

iv. Executives 12 5,472,341

Total : 12 5,472,341

v. Public Sector Companies and Corporations 4 4,750,873

Total : 4 4,750,873

information as required under tHe code of corporate governance


63

Number of Number ofShareholders’ category shareholders shares held

vi. Banks, Development Finance Institutions, Non-Banking Finance

Institutions, Insurance Companies, Takaful, Modaraba and Pension Funds 27 5,131,998

Total : 27 5,131,998

vii. Shareholders Holding five percent or more Voting Rights in the

Company (name wise details)

IGI Insurance Limited 1 21,082,601

Stora Enso AB, Sweden 1 5,396,650

National Bank Of Pakistan-Trustee Department NI(U)T Fund 1 4,578,528

Total : 3 31,057,779

Number of Number of

Shareholders’ category shareholders shares held Percentage

1 Director, Chief Executive Officer, and their spouse

and minor children 8 2,609,153 3.09

2 Associated Companies, undertakings and related parties 10 28,315,123 33.56

3 NIT and ICP 1 4,578,528 5.42

4 Banks, Development Financial Institutions, Non Banking

Financial Institutions 17 4,403,718 5.22

5 Insurance Companies 11 5,465,940 6.48

6 Modarabas and Mutual Funds 16 3,584,513 4.25

7 Shareholders holding 10% 1 21,082,601 24.99

8 General Public:

a. Local 3,863 20,575,895 24.38

b. Foreign 4 621,048 0.74

9 Others 120 14,225,586 16.86

64

This statement is being presented to comply with the

Code of Corporate Governance contained in the Listing

Regulations of Karachi, Lahore and Islamabad Stock

Exchanges for the purpose of establishing a framework of

good governance, whereby a listed company is managed

in compliance with the best practices of corporate

governance.

The Company has applied the principles contained in the

Code in the following manner:

1. The Company encourages representation of

independent non-executive directors and directors

representing minority interests on its board of

directors. At present the board includes:

Category Names

Independent Directors 1. Mr. Muhammad Aurangzeb

2. Mr. Shahid Aziz Siddiqui

3. Mr. Wazir Ali Khoja

Executive Directors 1. Syed Hyder Ali

2. Syed Aslam Mehdi

3. Mr. Khalid Yacob

Non-Executive Directors 1. Mr. Towfiq Habib Chinoy

2. Mr. Shamim Ahmad Khan

3. Syed Shahid Ali

4. Mr. Mats Nordlander

The independent directors meet the criteria of

independence under clause i(b) of the Code.

2. The directors have confirmed that none of them

is serving as a director on more than seven listed

companies, including this Company (excluding the

listed subsidiaries of listed holding companies where

applicable) except Mr. Wazir Ali Khoja, Chairman of

NIT and Mr. Shahid Aziz Siddiqui, Chairman of State

Life Insurance Corporation of Pakistan who have been

specifically exempted by the Securities and Exchange

Commission of Pakistan for holding directorship in

more than seven listed companies.

3. All the resident directors of the Company are

registered as taxpayers and none of them has

defaulted in payment of any loan to a banking

company, a DFI or an NBFI or, being a member of

stock exchange, has been declared as a defaulter by

that stock exchange.

4. A casual vacancy that occurred on the board on 20

October 2012 was filled up by the directors on the

same day.

5. The Company has prepared a “Code of Conduct” and

has ensured that appropriate steps have been taken

to disseminate it throughout the Company along with

its supporting policies and procedures.

6. The board has developed a vision/mission statement,

overall corporate strategy and significant policies

of the Company. A complete record of particulars of

significant policies along with the dates on which they

were approved or amended has been maintained.

7. All the powers of the board have been duly exercised

and decisions on material transactions, including

appointment and determination of remuneration and

terms and conditions of employment of the CEO,

other executive and non-executive directors, have

been taken by the board.

8. The meetings of the board were presided over by the

Chairman and, in his absence, by a director elected

by the board for this purpose and the board met at

least once in every quarter. Written notices of the

board meetings, along with agenda and working

papers, were circulated at least seven days before

the meetings. The minutes of the meetings were

appropriately recorded and circulated.

statement of compliancewitH tHe code of corporate governance

Category of Directots(Percentage)

Independent – 30%

Executive – 30%

Non Executive – 40%


65

17. The board has formed an Human Resource and

Remuneration (HR & R) Committee. It comprises

of five members, of whom three are non-executive

directors, including its chairman.

18. The board has set up an effective internal audit

function manned by suitably qualified and

experienced personnel for the purpose and are

conversant with the policies and procedures of the

Company.

19. The statutory auditors of the Company have

confirmed that they have been given a satisfactory

rating under the quality control review program of

the ICAP, that they or any of the partners of the firm,

their spouses and minor children do not hold shares

of the Company and that the firm and all its partners

are in compliance with International Federation of

Accountants (IFAC) guidelines on code of ethics as

adopted by the ICAP.

20. The statutory auditors or the persons associated

with them have not been appointed to provide

other services except in accordance with the listing

regulations and the auditors have confirmed that they

have observed IFAC guidelines in this regard.

21. The ‘closed period’, prior to the announcement

of interim/final results, and business decisions,

which may materially affect the market price of the

Company’s securities, was determined and intimated

to directors, employees and stock exchanges.

22. Material/price sensitive information has been

disseminated among all market participants at once

through stock exchanges.

23. We confirm that all other material principles

enshrined in the Code have been complied with.

Towfiq Habib ChinoyChairman

Karachi: March 18, 2013

9. The Company arranged one orientation course

for its directors during the year. Mr. Towfiq Habib

Chinoy and Mr. Shahid Aziz Siddiqui have obtained

certification under the directors training program

which meets the criteria specified by the Securities

and Exchange Commission of Pakistan. As per clause

(xi) of the Code, Syed Hyder Ali, Mr. Khalid Yacob

and Syed Shahid Ali are exempted from the directors

training program because of having more than 14

years of education and over 15 years of experience

on the board of listed companies. The Company

will ensure that the remaining directors acquire the

certification under the directors training program

within the time frame specified in the Code.

10. There were no new appointments of the CFO or

Company Secretary during the year. However, all such

appointments including their remuneration and terms

and conditions of employment are approved by the

board. There was a change in the Head of Internal

Audit during the year. The remuneration and terms

and conditions of employment of the Head of Internal

Audit have been approved by the Board.

11. The directors’ report for this year has been prepared

in compliance with the requirements of the Code

and fully describes the salient matters required to be

disclosed.

12. The financial statements of the Company were duly

endorsed by CEO and CFO before approval of the

board.

13. The directors, CEO and executives do not hold any

interest in the shares of the Company other than that

disclosed in the pattern of shareholding.

14. The Company has complied with all the corporate and

financial reporting requirements of the Code.

15. The board has formed an Audit Committee. It

comprises of six members including two independent

directors, three non-executive directors and one

executive director. Chairman of the committee is an

independent director.

16. The meetings of the audit committee were held at

least once every quarter prior to approval of interim

and final results of the Company and as required by

the Code. The terms of reference of the committee

have been formed and advised to the committee for

compliance.

66

have ensured compliance of requirement to the extent

of approval of related party transactions by the Board of

Directors and placement of such transactions before the

audit committee.

We have not carried out any procedures to determine

whether the related party transactions were undertaken at

arm’s length price or not.

Based on our review nothing has come to our attention,

which causes us to believe that the Statement of

Compliance does not appropriately reflect the Company’s

compliance, in all material respects, with the best

practices contained in the Code of Corporate Governance

as applicable to the Company for the year ended

December 31, 2012.

A.F.Ferguson & Co.

Chartered Accountants

Lahore, March 18, 2013

Name of Engagement Partner: Asad Aleem Mirza

We have reviewed the Statement of Compliance with

the best practices contained in the Code of Corporate

Governance prepared by the Board of Directors of

Packages Limited (‘The Company’) to comply with the

Listing Regulation No. 35 of the Karachi, Lahore and

Islamabad Stock Exchanges, where the Company is listed.

The responsibility for compliance with the Code of

Corporate Governance is that of the Board of Directors

of the Company. Our responsibility is to review, to the

extent where such compliance can be objectively verified,

whether the Statement of Compliance reflects the status

of the Company’s compliance with the provisions of the

Code of Corporate Governance and report if it does not.

A review is limited primarily to inquiries of the Company

personnel and review of various documents prepared by

the Company to comply with the Code.

As part of our audit of financial statements we are

required to obtain an understanding of the accounting

and internal control systems sufficient to plan the audit

and develop an effective audit approach. We are not

required to consider whether the Board’s statement on

internal control covers all risks and controls, or to form an

opinion on the effectiveness of such internal controls, the

Company’s corporate governance procedures and risks.

Regulations 35(x) of the Listing Regulations requires the

Company to place before the Board of Directors for their

consideration and approval related party transactions

distinguishing between transactions carried out on

terms equivalent to those that prevail in arm’s length

transactions and transactions which are not executed

at arm’s length price, recording proper justification for

using such alternate pricing mechanism. Further, all such

transactions are also required to be separately placed

before the audit committee. We are only required and

review report to tHe memberson statement of compliance witH best practices of code of corporate governance


67

(c) in our opinion and to the best of our information

and according to the explanations given to us, the

balance sheet, profit and loss account, statement

of comprehensive income, cash flow statement and

statement of changes in equity together with the notes

forming part thereof conform with approved accounting

standards as applicable in Pakistan, and, give the

information required by The Companies Ordinance, 1984,

in the manner so required and respectively give a true

and fair view of the state of the Company’s affairs as at

December 31, 2012 and of the loss, total comprehensive

income, changes in equity and its cash flows for the year

then ended; and

(d) inouropinionZakatdeductibleatsourceunderthe

ZakatandUshrOrdinance,1980,wasdeductedbythe

CompanyanddepositedintheCentralZakatFund

established under section 7 of that Ordinance.

A.F.Ferguson & Co.




We have audited the annexed balance sheet of Packages

Limited as at December 31, 2012 and the related profit and

loss account, statement of comprehensive income, cash

flow statement and statement of changes in equity together

with the notes forming part thereof, for the year then ended

and we state that we have obtained all the information and

explanations which, to the best of our knowledge and belief,

were necessary for the purposes of our audit.

It is the responsibility of the Company’s management to

establish and maintain a system of internal control, and

prepare and present the above said statements in conformity

with the approved accounting standards and the requirements

of The Companies Ordinance, 1984. Our responsibility is to

express an opinion on these statements based on our audit.

We conducted our audit in accordance with the auditing

standards as applicable in Pakistan. These standards require

that we plan and perform the audit to obtain reasonable

assurance about whether the above said statements are free of

any material misstatement. An audit includes examining, on a

test basis, evidence supporting the amounts and disclosures

in the above said statements. An audit also includes assessing

the accounting policies and significant estimates made by

management, as well as, evaluating the overall presentation of

the above said statements. We believe that our audit provides

a reasonable basis for our opinion and, after due verification,

we report that:

(a) in our opinion, proper books of account have been

kept by the Company as required by The Companies

Ordinance, 1984;

(b) in our opinion

(i) the balance sheet and profit and loss account

together with the notes thereon have been drawn up

in conformity with The Companies Ordinance, 1984,

and are in agreement with the books of account and

are further in accordance with accounting policies

consistently applied except for the changes resulted

on initial application of standards, amendments, or

an interpretation to the existing standards as stated

in note 2.2.1 to the annexed financial statements,

with which we concur;

(ii) the expenditure incurred during the year was for the

purpose of the Company’s business; and

(iii) the business conducted, investments made and

the expenditure incurred during the year were in

accordance with the objects of the Company;

auditors’ report to tHe members

68


Financial StatementsFor the year ended December 31, 2012

70

Balance Sheetas at December 31, 2012

(Rupees in thousand) Note 2012 2011

EQUITY AND LIABILITIES

CAPITAL AND RESERVES

Authorised capital

150,000,000 (2011: 150,000,000) ordinary shares of Rs. 10 each 1,500,000 1,500,000

22,000,000 (2011: 22,000,000) 10 % non-voting cumulative

preference shares / convertible stock of Rs. 190 each 4,180,000 4,180,000

Issued, subscribed and paid up capital

84,379,504 (2011: 84,379,504) ordinary shares of Rs. 10 each 5 843,795 843,795

Reserves 6 31,075,416 28,179,067

Preference shares / convertible stock reserve 7 1,605,875 1,605,875

Accumulated loss (2,668,778) (1,080,744)

30,856,308 29,547,993


Long-term finances 7 4,470,577 8,575,339

Deferred income tax liabilities 8 345,808 2,004,000

Retirement benefits 9 86,512 12,358

Deferred liabilities 10 121,061 161,795

5,023,958 10,753,492

CURRENT LIABILITIES

Current portion of long-term finances - secured 7 1,000,000 380,952

Finances under mark up arrangements - secured 11 808,942 796,227

Derivative financial instruments 12 164,559 -

Trade and other payables 13 1,977,498 1,731,255

Accrued finance costs 14 530,501 534,021

4,481,500 3,442,455

Liabilities of disposal group classified as held for sale 15 5,669,197 -

CONTINGENCIES AND COMMITMENTS 16 - -

46,030,963 43,743,940


71


ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 17 3,459,115 18,346,058

Investment property 18 25,473 29,943

Intangible assets 19 41,411 38,888

Investments 20 20,795,660 16,288,141

Long-term loans and deposits 21 97,105 110,873


24,457,773 34,903,202

CURRENT ASSETS

Stores and spares 22 461,625 978,741

Stock-in-trade 23 1,909,807 4,525,757

Trade debts 24 2,279,915 1,764,577

Loans, advances, deposits, prepayments and

other receivables 25 412,866 454,548

Income tax receivable 26 1,603,306 941,439

Cash and bank balances 27 362,380 175,676

7,029,899 8,840,738

Assets of disposal group classified as held for sale 15 14,543,291 -

46,030,963 43,743,940

The annexed notes 1 to 48 form an integral part of these financial statements.

Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & Managing Director Director

72

2012 2011 (Rupees in thousand) Note Represented

Continuing operations

Local sales 13,808,154 13,723,196

Export sales 63,220 73,456

13,871,374 13,796,652

Less: Sales tax and excise duty 2,110,315 2,393,077

Commission 15,769 17,164

2,126,084 2,410,241

Net sales 11,745,290 11,386,411

Cost of sales 28 (10,386,198) (10,071,355)

Gross profit 1,359,092 1,315,056

Administrative expenses 29 (345,690) (286,809)

Distribution and marketing costs 30 (416,321) (385,980)

Projects expenditure 31 - (55,768)

Other operating expenses 32 (30,888) (4,062)

Other operating income 33 288,492 289,281

Profit from operations 854,685 871,718

Finance costs 34 (528,371) (483,649)

Investment income 35 1,534,453 1,040,290

Reversal of impairment / (impairment) on investments 36 361,161 (391,189)

Profit before tax 2,221,928 1,037,170

Taxation 37 (874,592) (876,444)

Profit for the year from Continuing operations 1,347,336 160,726

Loss for the year from Discontinued operations 15.2 (4,058,801) (1,728,678)

Loss for the year (2,711,465) (1,567,952)

Basic earnings / (loss) per share

From Continuing operations Rupees 44 15.97 1.90

From Discontinued operations Rupees 44 (48.10) (20.48)

From Loss for the year Rupees (32.13) (18.58)

Diluted earnings / (loss) per share

From Continuing operations Rupees 44 15.76 1.90

From Discontinued operations Rupees 44 (48.10) (20.48)

From Loss for the year Rupees (32.34) (18.58)


Profit and Loss Accountfor the year ended December 31, 2012



73

2012 2011 (Rupees in thousand) Represented

Loss for the year (2,711,465) (1,567,952)

Other comprehensive income

Surplus on re-measurement of available

for sale financial assets 4,146,349 4,460,293

Total comprehensive income for the year 1,434,884 2,892,341

Attributable to:

- Continuing operations 5,493,685 4,621,019

- Discontinued operations (4,058,801) (1,728,678)

1,434,884 2,892,341


Statement of Comprehensive Incomefor the year ended December 31, 2012


74

Preference shares / Share Share Fair value General convertible Accumulated (Rupees in thousand) capital premium reserve reserve stock reserve profit / (loss) Total

Balance as on December 31, 2010 843,795 2,876,893 4,681,548 16,660,333 1,605,875 261,441 26,929,885

Appropriation of funds

Transferred to profit and loss account - - - (500,000) - 500,000 -

Transactions with owners

Final Dividend for the year ended December 31, 2010

Rs. 3.25 per share - - - - - (274,233) (274,233)

Loss for the year - - - - - (1,567,952) (1,567,952)



for sale financial assets - - 4,460,293 - - - 4,460,293

Total comprehensive income for the year - - 4,460,293 - - (1,567,952) 2,892,341

Balance as on December 31, 2011 843,795 2,876,893 9,141,841 16,160,333 1,605,875 (1,080,744) 29,547,993


Transferred to profit and loss account - - - (1,250,000) - 1,250,000 -



Rs. 1.50 per share - - - - - (126,569) (126,569)

Loss for the year - - - - - (2,711,465) (2,711,465)



for sale financial assets - - 4,146,349 - - - 4,146,349

- - 4,146,349 - - (2,711,465) 1,434,884

Balance as on December 31, 2012 843,795 2,876,893 13,288,190 14,910,333 1,605,875 (2,668,778) 30,856,308


Statement of ChangeS in equityfor the year ended december 31, 2012



75


Cash flows from operating activities

Cash generated from / (used in) operations 42 395,637 (810,780)

Finance cost paid (1,509,395) (1,423,001)

Taxes paid (758,677) (431,528)

Payments for accumulating compensated absences (28,670) (10,524)

Retirement benefits paid (73,960) (62,831)

Net cash used in operating activities (1,975,065) (2,738,664)

Cash flows from investing activities

Fixed capital expenditure (1,234,627) (1,225,371)

Acquisition of subsidiary (9) -

Investments - net 13 3,035

Net decrease in long-term loans and deposits 13,768 17,556

Proceeds from disposal of property, plant and equipment 113,764 190,023

Proceeds from assets written off due to fire 233,463 384,563

Dividends received 1,534,440 1,037,255

Net cash generated from investing activities 660,812 407,061

Cash flows from financing activities

Repayment of long-term finances - secured (5,485,714) (14,286)

Proceeds from long-term finances - secured 2,000,000 1,000,000

Dividend paid (126,044) (273,574)

Net cash (used in) / generated from financing activities (3,611,758) 712,140

Net decrease in cash and cash equivalents (4,926,011) (1,619,463)

Cash and cash equivalents at the beginning of the year (620,551) 998,912

Cash and cash equivalents at the end of the year 43 (5,546,562) (620,551)


Cash Flow Statement for the year ended December 31, 2012


76

1. Legal status and nature of business

Packages Limited (‘The Company’) is a public limited Company incorporated in Pakistan and is listed on Karachi, Lahore and Islamabad Stock Exchanges. It is principally engaged in the manufacture and sale of paper, paperboard, packaging materials and tissue products.

The Company has entered into 50/50 Joint Venture Agreement (the “JV Agreement”) on September 17, 2012 with

‘Stora Enso OYJ Group’ (‘Stora Enso’) of Finland in its 100% wholly owned subsidiary Bulleh Shah Packaging (Private) Limited [formerly Bulleh Shah Paper Mill (Private) Limited] (‘BSPL’). The Joint Venture will include Paper & Paperboard and Corrugated business operations at Kasur and Karachi and will involve initial equity participation of Stora Enso of 35% by way of subscription of right shares with a commitment to increase the shareholding to 50% at a later stage subject to certain conditions being met. The agreed value for 100% of the Joint Venture Company is USD 107.5 million on a cash and debt free basis with additional equity to be subscribed by Stora Enso through right shares in the Joint Venture Company of USD 17.5 million, based on the financial results of second half of 2012 and first half of 2013. Packages Limited shall continue to hold minimum 50% ownership and future profits of the Joint Venture.

Moreover, the Company also decided to close down its Paper and Paperboard operations in Lahore, in addition

to the above mentioned transaction, during the year. As a result, the Company’s operations have been divided into Continuing and Discontinued operations in

accordance with the requirements of International Financial Reporting Standard (IFRS) 5, ‘Non-current assets held for sale and Discontinued operations’. Paper & Paperboard and Corrugated businesses have been classified as Discontinued operations because these will form part of the Joint Venture. Continuing operations will include Folding Cartons, Flexible Packaging and Consumer Products businesses.

Upon subscription by Stora Enso in BSPL, the Company shall derecognise its investment in BSPL owing to loss

of control and recognise an investment in jointly controlled entity, with Stora Enso as the joint venture partner. In view of the above, assets and corresponding liabilities as are envisaged to be transferred to BSPL are classified as held for sale under IFRS 5 as reflected in note 15 of these financial statements. These assets and liabilities have been measured at lower of their respective carrying values and fair values less cost to sell and the resultant estimated charge has been recognised in the profit and loss account.

The Paper and Paperboard operations in Lahore have also been classified as a Discontinued operation as

reflected in note 15 of these financial statements, in accordance with the requirements of IFRS 5. This has not been classified as held for sale as it does not meet the criteria for being classified as held for sale under IFRS 5.

The figures of the prior period have been represented in accordance with the requirements of IFRS 5, wherever

relevant. 2. Basis of preparation

2.1 These financial statements have been prepared in accordance with the requirements of The Companies Ordinance, 1984 (the Ordinance) and the approved accounting standards as applicable in Pakistan. Approved accounting standards comprise of such International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board and Islamic Financial Accounting Standards (IFAS) issued by the Institute of Chartered Accountants of Pakistan as are notified under The Companies Ordinance, 1984, provisions of and directives issued under The Companies Ordinance, 1984. Wherever the requirements of The Companies Ordinance, 1984 or directives issued by Securities and Exchange Commission of Pakistan differ with the requirements of IFRS or IFAS, the requirements of The Companies Ordinance, 1984 or the requirements of the said directives prevail.

2.2 Initial application of standards, amendments or an interpretation to existing standards

The following amendments to existing standards have been published that are applicable to the Company’s financial statements covering annual periods, beginning on or after the following dates:

2.2.1 Amendments to published standards effective in current year

New and amended standards, and interpretations mandatory for the first time for the financial year beginning January 1, 2012:

IFRS 1 (Amendment), ‘First time adoption’, on fixed dates and hyperinflation. These are applicable on accounting

Notes to and Forming Part of the Financial Statementsfor the year ended December 31, 2012


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periods beginning on or after July 1, 2011. These amendments include two changes to IFRS 1, ‘First time adoption’ of IFRS. The first replaces references to a fixed date of January 1, 2004 with ‘the date of transition to IFRSs’, thus eliminating the need for companies adopting IFRSs for the first time to restate derecognition transactions that occurred before the date of transition to IFRSs. The second amendment provides guidance on how an entity should resume presenting financial statements in accordance with IFRSs after a period when the entity was unable to comply with IFRSs because its functional currency was subject to severe hyperinflation. The application of this amendment has no material impact on the Company’s financial statements.

IFRS 7 (Amendments), ‘Financial instruments: Disclosures’ on transfers of assets. These are applicable on

accounting periods beginning on or after July 1, 2011. These amendments arise from the IASB’s review of off-balance sheet activities. The amendments shall promote transparency in the reporting of transfer transactions and improve users’ understanding of the risk exposures relating to transfers of financial assets and the effect of those risks on an entity’s financial position, particularly those involving securitisation of financial assets. Earlier application is permitted. The application of these amendments have no material impact on the Company’s financial statements.

IAS 12 (Amendments), ‘Income taxes’, on deferred tax. These are applicable on accounting periods beginning on

or after January 1, 2012. IAS 12, ‘Income taxes’, currently requires an entity to measure the deferred tax relating to an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale. It can be difficult and subjective to assess whether recovery shall be through use or through sale when the asset is measured using the fair value model in IAS 40, ‘Investment property’. This amendment therefore introduces an exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment property measured at fair value. As a result of the amendments, SIC 21, ‘Income taxes - recovery of revalued non-depreciable assets’, shall no longer apply to investment properties carried at fair value. The amendments also incorporate into IAS 12 the remaining guidance previously contained in SIC 21, which is withdrawn. The application of these amendments have no material impact on the Company’s financial statements.

2.2.2 Standards, amendments and interpretations to existing standards that are not yet effective and have not

been early adopted by the Company

The following amendments and interpretations to existing standards have been published and are mandatory for the Company’s accounting periods beginning on or after January 1, 2013 or later periods, but the Company has not early adopted them:

Annual improvements to IFRSs 2011 are applicable on accounting periods beginning on or after January 1,

2013. This set of amendments includes changes to five standards: IFRS 1, ‘First time adoption’, IAS 1, ‘Financial statement presentation’, IAS 16, ‘Property, plant and equipment’, IAS 32, ‘Financial instruments; Presentation’ and IAS 34, ‘Interim financial reporting’. The application of these amendments have no material impact on the Company’s financial statements.

IFRS 1 (Amendments), ‘First time adoption’, on Government loans is applicable on accounting periods beginning

on or after January 1, 2013. The amendment addresses how a first-time adopter would account for a Government loan with a below-market rate of interest when transitioning to IFRS. It also adds an exception to the retrospective application of IFRS, which provides the same relief to first-time adopters granted to existing preparers of IFRS financial statements when the requirement was incorporated into IAS 20 in 2008. The Company shall apply these amendments from January 1, 2013 and does not expect to have a material impact on its financial statements.

IFRS 7 (Amendments), ‘Financial instruments: Disclosures’, on offsetting financial assets and financial liabilities is

applicable on accounting periods beginning on or after January 1, 2013. The amendment includes new disclosures to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare financial statements in accordance with US GAAP. The Company shall apply these amendments from January 1, 2013 and does not expect to have a material impact on its financial statements.

IFRS 9 - ‘Financial instruments’ - classification and measurement. This is applicable on accounting periods

beginning on or after January 1, 2015. This standard on classification and measurement of financial assets and financial liabilities will replace IAS 39, ‘Financial instruments: Recognition and measurement’. IFRS 9 has two measurement categories: amortised cost and fair value. All equity instruments are measured at fair value. A debt instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the cash flows represent principal and interest. For liabilities, the standard retains most of the IAS 39 requirements. These include amortised-cost accounting for most financial liabilities, with bifurcation of embedded derivatives.

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The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income statement, unless this creates an accounting mismatch. This change will mainly affect financial institutions. The Company shall apply this standard from January 1, 2015 and does not expect to have a material impact on its financial statements.

IFRS 11 - ‘Joint arrangements’ is applicable on accounting periods beginning on or after January 1, 2013. IFRS 11 is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the parties to the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the arrangement and therefore accounts for its share of assets, liabilities, revenue and expenses. Joint ventures arise where the joint operator has rights to the net assets of the arrangement and therefore equity accounts for its interest. Proportional consolidation of joint ventures is no longer allowed. The Company shall apply this standard from January 1, 2013 and does not expect to have a material impact on its financial statements.

IFRS 12 - ‘Disclosures of interests in other entities’. This is applicable on accounting periods beginning on or after

January 1, 2013. This standard includes the disclosure requirements for all forms of interests in other entities, including joint arrangements, associates, special purpose vehicles and other off-balance sheet vehicles. The Company shall apply this standard from January 1, 2013 and does not expect to have a material impact on its financial statements.

IFRS 13 - ‘Fair value measurement’. This is applicable on accounting periods beginning on or after January 1, 2013.

This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements, which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide guidance on how it should be applied where its use is already required or permitted by other standards within IFRSs or US GAAP. The Company shall apply this standard from January 1, 2013 and does not expect to have a material impact on its financial statements.

IAS 1 (Amendments), ‘Financial statement presentation’ regarding other comprehensive income. This is applicable

on accounting periods beginning on or after July 1, 2012. The main change resulting from these amendments is a requirement for entities to group items presented in other comprehensive income (OCI) on the basis of whether they are potentially recycled to profit or loss (re-classification adjustments). The amendments do not address which items are presented in OCI. The Company shall apply these amendments from January 1, 2013 and does not expect to have a material impact on its financial statements.

IAS 19 (Amendments), ‘Employee benefits’ is applicable on accounting periods beginning on or after January 1,

2013. These amendments shall eliminate the corridor approach and calculate finance costs on a net funding basis. The Company shall apply these amendments from January 1, 2013 and its impact on retained earnings shall be Rs. 259.306 million due to recognition of current unrealised actuarial losses on its defined benefit plans.

IAS 27 (Revised 2011), ‘Separate financial statements’ is applicable on accounting periods beginning on or

after January 1, 2013. It includes the provisions on separate financial statements that are left after the control provisions of IAS 27 which have been included in the new IFRS 10. The Company shall apply the revised standard from January 1, 2013 and does not expect to have a material impact on its financial statements.

IAS 28 (Revised 2011), ‘Associates and joint ventures’ is applicable on accounting periods beginning on or after

January 1, 2013. It includes the requirements for associates and joint ventures that have to be equity accounted following the issue of IFRS 11. The Company shall apply the revised standard from January 1, 2013 and does not expect to have a material impact on its financial statements.

IAS 32 (Amendments), ‘Financial instruments: Presentation’, on offsetting financial assets and financial

liabilities is applicable on accounting periods beginning on or after January 1, 2014. These amendments update the application guidance in IAS 32, ‘Financial instruments: Presentation’, to clarify some of the requirements for offsetting financial assets and financial liabilities on the balance sheet. The Company shall apply these amendments from January 1, 2014 and does not expect to have a material impact on its financial statements.


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3. Basis of measurement

3.1 These financial statements have been prepared under the historical cost convention except for revaluation of certain financial instruments at fair value and recognition of certain employee retirement benefits at present value.

3.2 The Company’s significant accounting policies are stated in note 4. Not all of these significant policies require the

management to make difficult, subjective or complex judgments or estimates. The following is intended to provide an understanding of the policies the management considers critical because of their complexity, judgment and estimation involved in their application and their impact on these financial statements. Judgments and estimates are continually evaluated and are based on historical experience, including expectations of future events that are believed to be reasonable under the circumstances. These judgments involve assumptions or estimates in respect of future events and the actual results may differ from these estimates. The areas involving a higher degree of judgments or complexity or areas where assumptions and estimates are significant to the financial statements are as follows:

i) Estimated useful lives of property, plant and equipment - note 4.2 ii) Provision for employees’ retirement benefits - note 4.7 & 9 iii) Loss recognised on the re-measurement of assets of disposal group - note 15.2 iv) Recoverable amount of certain investments in equity instruments - note 20.2 v) Provision for taxation - note 37

4. Significant accounting policies

The significant accounting policies adopted in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

4.1 Taxation

Current

Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year, if enacted. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years.

Deferred

Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits shall be available against which the deductible temporary differences, unused tax losses and tax credits can be utilised.

Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based

on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or credited in the profit and loss account, except in the case of items credited or charged to equity in which case it is included in equity.

4.2 Property, plant and equipment

Property, plant and equipment, except freehold land, are stated at cost less accumulated depreciation and any identified impairment loss. Freehold land is stated at cost less any identified impairment loss. Cost in relation to certain plant and machinery signifies historical cost, gains and losses transferred from equity on qualifying cash flow hedges as referred to in note 4.17 and borrowing costs as referred to in note 4.20.

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Depreciation on all property, plant and equipment is charged to profit on the straight-line method so as to write off the depreciable amount of an asset over its estimated useful life at the following annual rates:

Buildings 2.5% to 20% Plant and machinery 6.25% to 33.33% Other equipments 10% to 33.33% Furniture and fixtures 10% to 20% Vehicles 20% The assets’ residual values and useful lives are reviewed, at each financial year end, and adjusted if impact on

depreciation is significant. The Company’s estimate of the residual value of its property, plant and equipment as at December 31, 2012 has not required any adjustment as its impact is considered insignificant.

Depreciation on additions to property, plant and equipment is charged from the month in which an asset is

acquired or capitalised while no depreciation is charged for the month in which the asset is disposed off. The Company assesses at each balance sheet date whether there is any indication that property, plant and

equipment may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying amounts exceed the respective recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognised in profit and loss account. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Where an impairment loss is recognised, the depreciation charge is adjusted in the future periods to allocate the asset’s revised carrying amount over its estimated useful life.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,

only when it is probable that future economic benefits associated with the item shall flow to the Company and the cost of the item can be measured reliably. All other repair and maintenance costs are charged to profit and loss account during the period in which they are incurred.

The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and the carrying amount of the asset is recognised as an income or expense.

Capital work-in-progress is stated at cost less any identified impairment loss.

4.3 Investment property

Property not held for own use or for sale in the ordinary course of business is classified as investment property. The investment property of the Company comprises land and buildings and is valued using the cost method i.e. at cost less any accumulated depreciation and any identified impairment loss.

Depreciation on buildings is charged to profit on the straight line method so as to write off the depreciable

amount of building over its estimated useful life at the rates ranging from 3.33% to 6.67% per annum. Depreciation on additions to investment property is charged from the month in which a property is acquired or capitalised while no depreciation is charged for the month in which the property is disposed off.

The assets’ residual values and useful lives are reviewed, at each financial year end, and adjusted if impact on

depreciation is significant. The Company’s estimate of the residual value of its investment property as at December 31, 2012 has not required any adjustment as its impact is considered insignificant.

The Company assesses at each balance sheet date whether there is any indication that investment property may

be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying amounts exceed the respective recoverable amount, assets are written down to their recoverable amount and the resulting impairment loss is recognised in profit and loss account. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Where an impairment loss is recognised, the depreciation charge is adjusted in the future periods to allocate the asset’s revised carrying amount over its estimated useful life.

The gain or loss on disposal or retirement of an asset represented by the difference between the sale proceeds and

the carrying amount of the asset is recognised as an income or expense.


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4.4 Intangible assets

Expenditure incurred to acquire computer software and SAP Enterprise Resource Planning (ERP) System are capitalised as intangible assets and stated at cost less accumulated amortisation and any identified impairment loss. Intangible assets are amortised using the straight line method over a period of three to five years.

Development costs are recognised as intangible assets when the following criteria are met: - it is technically feasible to complete the intangible asset so that it will be available for use; - management intends to complete the intangible asset and use or sell it; - there is an ability to use or sell the intangible asset; - it can be demonstrated how the intangible asset will generate probable future economic benefits; - adequate technical, financial and other resources to complete the development and to use or sell the intangible

asset are available; and - the expenditure attributable to the intangible asset during its development can be reliably measured.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Amortisation on additions to intangible assets is charged from the month in which an asset is acquired or

capitalised while no amortisation is charged for the month in which the asset is disposed off.

The Company assesses at each balance sheet date whether there is any indication that intangible assets may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they are recorded in excess of their recoverable amount. Where carrying amounts exceed the respective recoverable amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognised in profit and loss account. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Where an impairment loss is recognised, the amortisation charge is adjusted in the future periods to allocate the asset’s revised carrying amount over its estimated useful life.

4.5 Leases

(1) The Company is the lessee:

Finance leases

Leases where the Company has substantially all the risks and rewards of ownership are classified as finance leases. Assets subject to finance lease are initially recognised at the lower of present value of minimum lease payments under the lease agreements and the fair value of the assets. Subsequently these assets are stated at cost less accumulated depreciation and any identified impairment loss.

The related rental obligations, net of finance charges, are included in liabilities against assets subject to finance

lease. The liabilities are classified as current and long-term depending upon the timing of the payment. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the

balance outstanding. The interest element of the rental is charged to profit over the lease term. Assets acquired under a finance lease are depreciated over the useful life of the asset on a straight-line method

at the rates given in note 4.2. Depreciation of leased assets is charged to profit and loss account. Depreciation on additions to leased assets is charged from the month in which an asset is acquired while no

depreciation is charged for the month in which the asset is disposed off. Operating leases

Leases including Ijarah financing where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessor) are charged to profit on a straight-line basis over the lease / Ijarah term unless another systematic basis is representative of the time pattern of the Company’s benefit.

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(2) The Company is the lessor:

Operating leases

Assets leased out under operating leases are included in investment property as referred to in note 18. They are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and equipment. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the lease term.

4.6 Investments

Investments intended to be held for less than twelve months from the balance sheet date or to be sold to raise operating capital, are included in current assets, all other investments are classified as non-current. Management determines the appropriate classification of its investments at the time of the purchase and re-evaluates such designation on a regular basis.

Investments in equity instruments of subsidiaries and associates

Investments in subsidiaries and associates where the Company has significant influence are measured at cost in the Company’s financial statements. Cost in relation to investments made in foreign currency is determined by translating the consideration paid in foreign currency into Pak Rupees at exchange rates prevailing on the date of transactions.

The Company is required to issue consolidated financial statements along with its separate financial statements, in accordance with the requirements of IAS 27 ‘Consolidated and Separate Financial Statements’. Investments in associates, in the consolidated financial statements, are being accounted for using the equity method.

At each balance sheet date, the Company reviews the carrying amounts of the investments in subsidiaries

and associates to assess whether there is any indication that such investments have suffered an impairment loss. If any such indication exists, the recoverable amount is estimated in order to determine the extent of the impairment loss, if any. In making an estimate of recoverable amount of these investments, the management considers future stream of cash flows and an estimate of the terminal value of these investments. Impairment losses are recognised as expense in the profit and loss account.

Investments in subsidiaries and associates, that suffered an impairment, are reviewed for possible reversal of

impairment at each reporting date. Impairment losses recognised in the profit and loss account on investments in subsidiaries and associates are reversed through the profit and loss account.

Other investments

The other investments made by the Company are classified for the purpose of measurement into the following categories:

Held to maturity

Investments with fixed maturity that the management has the intent and ability to hold to maturity are classified as held to maturity and are initially measured at cost and at subsequent reporting dates measured at amortised cost using the effective yield method.

Available for sale

The financial assets including investments in associated undertakings where the Company does not have significant influence that are intended to be held for an indefinite period of time or may be sold in response to the need for liquidity are classified as available for sale.

Investments classified as available for sale are initially measured at cost, being the fair value of consideration

given. At subsequent reporting dates, these investments are remeasured at fair value (quoted market price), unless fair value cannot be reliably measured. The investments for which a quoted market price is not available, are measured at cost as it is not possible to apply any other valuation methodology. Unrealised gains and losses arising from the changes in the fair value are included in fair value reserves in the period in which they arise.

All purchases and sales of investments are recognised on the trade date which is the date that the Company

commits to purchase or sell the investment. Cost of purchase includes transaction cost.


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At each balance sheet date, the Company reviews the carrying amounts of the investments to assess whether there is any indication that such investments have suffered an impairment loss. If any such indication exists, the recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment losses are recognised as expense in the profit and loss account. In respect of ‘available for sale’ financial assets, cumulative impairment loss less any impairment loss on that financial asset previously recognised in profit and loss account, is removed from equity and recognised in the profit and loss account. Impairment losses recognised in the profit and loss account on equity instruments are not reversed through the profit and loss account.

4.7 Employee retirement benefits

The main features of the schemes operated by the Company for its employees are as follows: 4.7.1 Defined benefit plans

(a) All the executive staff participates in an approved funded defined benefit pension plan. In addition, there is an approved funded defined benefit gratuity plan for all employees. Monthly contributions are made to these funds on the basis of actuarial recommendation at the rate of 20 percent per annum of basic salaries for pension and 4.50 percent per annum of basic salaries for gratuity. The latest actuarial valuations for the pension and gratuity schemes were carried out as at December 31, 2012. The actual returns on plan assets during the year were Rs. 160.162 million and Rs. 65.516 million for the pension and gratuity funds respectively. The actual returns on plan assets represent the difference between the fair value of plan assets at beginning of the year and end of the year after adjustments for contributions made by the Company as reduced by benefits paid during the year.

The future contribution rates of these plans include allowances for deficit and surplus. Projected unit credit

method, using the following significant assumptions, is used for valuation of these schemes: Discount rate 11 percent per annum; Expected rate of increase in salary level 9 percent per annum; Expected mortality rate EFU 61-66 mortality table; Expected rate of return 12.5 percent per annum; and Future pension increase 2.5 percent per annum. Plan assets include long-term Government bonds, equity instruments of listed companies and term deposits with

banks. Return on Government bonds and debt is at fixed rates, however, due to increased volatility of share prices in recent months, there is no clear indication of return on equity shares, therefore, it has been assumed that the yield on equity shares would match the return on debt.

The Company is expected to contribute Rs. 30.410 million to the pension fund and Rs. 12.422 million to the

gratuity fund in the next financial year. The Company’s policy with regard to actuarial gains / losses is to follow minimum recommended approach under

IAS 19 - ‘Employee benefits’. In a meeting held on December 26, 2012 the board of trustees of the pension fund have decided to convert the

existing defined benefit plan to defined contribution plan for all its employees active as on December 31, 2012 with effect from January 1, 2013 subject to such regulatory approvals as are necessary in the circumstances. The proposed scheme has been subsequently approved by the taxation authorities on February 22, 2013 and respective employees consent with the proposed scheme has also been obtained in the subsequent period. This conversion has been accounted for as a curtailment under IAS 19 - ‘Employee benefits’.

The Joint Venture agreement with Stora Enso requires all accumulated balances due and payable to the

employees in respect of pension and gratuity maintained with Packages Limited as a consequence of cessation of their employment with Packages Limited to be transferred by Packages Limited to BSPL or directly paid to the employees. This has been treated as a settlement as per IAS 19 - ‘Employee benefits’.

(b) Accumulating compensated absences

The Company provides for accumulating compensated absences when the employees render services that increase their entitlement to future compensated absences. The executives and workers are entitled to earned annual and medical leaves on the basis of their service with the Company. The annual leaves can be encashed at the time the employee leaves the Company on the basis of the gross salary while no encashment is available for medical leaves to executives.

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The Company uses the valuation performed by an independent actuary as the present value of its accumulating compensated absences.

Projected unit credit method, using the following significant assumptions, has been used for valuation of

accumulating compensated absences: Discount rate 11 percent per annum; Expected rate of increase in salary level 9 percent per annum; and Expected mortality rate EFU 61-66 mortality table. 4.7.2 Defined contribution plan

There is an approved contributory provident fund for all employees. Equal monthly contributions are made by the Company and the employees to the fund.

Retirement benefits are payable to staff on completion of prescribed qualifying period of service under these

schemes. 4.7.3 Pension plan is a multi-employer plan formed by the Company in collaboration with Tri Pack Films Limited and DIC

Pakistan Limited. Similarly, Gratuity plan is also a multi-employer plan formed by the Company in collaboration with DIC Pakistan Limited. Contribution by the companies is based on the respective number of employees of each company. Packages reports its proportionate share of the plan’s commitments, managed assets and costs, in accordance with guidance provided by IAS 19 - Employee Benefits, regarding defined benefit plans, based on the number of its employees participating in the plans.

4.8 Stores and spares

Stores and spares are valued at moving average cost, while items considered obsolete are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon.

Provision is made in the financial statements for obsolete and slow moving stores and spares based on management estimate.

4.9 Stock-in-trade

Stock of raw materials, except for those in transit, work-in-process and finished goods are valued principally at the lower of cost and net realisable value. Cost of raw materials is determined using the weighted average cost method. Cost of work-in-process and finished goods comprises direct production costs such as raw materials, consumables and labour as well as production overheads such as employee wages, depreciation, maintenance, etc. The production overheads are measured based on a standard cost method, which is reviewed regularly to ensure relevant measures of utilisation, production lead time etc.

Materials in transit are stated at cost comprising invoice value plus other charges paid thereon. If the expected sales price less completion costs and costs to execute sales (net realisable value) is lower than

the carrying amount, a write-down is recognised for the amount by which the carrying amount exceeds its net realisable value. Provision is made in the financial statements for obsolete and slow moving stock in trade based on management estimate.

4.10 Financial instruments

Financial assets and financial liabilities are recognised at the time when the Company becomes a party to the contractual provisions of the instrument and derecognised when the Company loses control of contractual rights that comprise the financial assets and in the case of financial liabilities when the obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on derecognition of financial assets and financial liabilities is included in the profit and loss account for the year.

Financial instruments carried on the balance sheet include loans, investments, trade and other debts, cash and bank balances, borrowings, trade and other payables, accrued expenses and unclaimed dividends. All financial assets and liabilities are initially measured at cost, which is the fair value of consideration given and received respectively. These financial assets and liabilities are subsequently measured at fair value or cost as the case may be. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.


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4.11 Offsetting of financial assets and liabilities

Financial assets and liabilities are offset and the net amount is reported in the financial statements only when there is a legally enforceable right to set off the recognised amount and the Company intends either to settle on a net basis or to realise the assets and to settle the liabilities simultaneously.

4.12 Trade debts

Trade debts are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method, less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified.

4.13 Cash and cash equivalents

Cash and cash equivalents are carried in the balance sheet at cost. For the purpose of cash flow statement, cash and cash equivalents comprise cash in hand, demand deposits, other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value and finances under mark up arrangements. In the balance sheet, finances under mark up arrangements are included in current liabilities.

4.14 Non-current assets held-for-sale

Non-current assets are classified as assets held-for-sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less cost to sell.

4.15 Borrowings

Borrowings are initially recorded at the proceeds received. In subsequent periods, borrowings are stated at amortised cost using the effective yield method. Finance costs are accounted for on an accrual basis and are shown as accrued finance cost to the extent of the amount remaining unpaid.

4.16 Trade and other payables

Liabilities for creditors and other amounts payable are recognised at fair value and subsequently measured at amortised cost using the effective interest method.

4.17 Derivative financial instruments

These are initially recorded at cost on the date a derivative contract is entered into and are remeasured to fair value at subsequent reporting dates. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Company designates certain derivatives as cash flow hedges.

The Company documents at the inception of the transaction the relationship between the hedging instruments and

hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Company also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges

are recognised in statement of other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account.

Amounts accumulated in equity are recognised in profit and loss account in the periods when the hedged item

shall effect profit or loss. However, when the forecast hedged transaction results in the recognition of a non-financial asset or a liability, the gain and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

4.18 Revenue recognition

Revenue is recognised on despatch of goods or on the performance of services. Return on deposits is accrued on a time proportion basis by reference to the principal outstanding and the

applicable rate of return.

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Dividend income and entitlement of bonus shares are recognised when right to receive such dividend and bonus shares is established.

4.19 Foreign currency transactions and translation

Foreign currency transactions are translated into Pak Rupees using the exchange rates prevailing at the dates of the transactions. All monetary assets and liabilities in foreign currencies are translated into Pak Rupees at the rates of exchange prevailing at the balance sheet date. Foreign exchange gains and losses on translation are recognised in the profit and loss account. All non-monetary items are translated into Pak Rupees at exchange rates prevailing on the date of transaction or on the date when fair values are determined.

The financial statements are presented in Pak Rupees, which is the Company’s functional and presentation

currency. 4.20 Borrowing costs

Mark up, interest and other charges on borrowings are capitalised up to the date of commissioning of the related property, plant and equipment acquired out of the proceeds of such borrowings. All other mark up, interest and other charges are charged to profit and loss account.

4.21 Dividend

Dividend distribution to the Company’s shareholders is recognised as a liability in the period in which the dividends are approved.

4.22 Compound financial instruments

Compound financial instruments issued by the Company represent preference shares / convertible stock that can be converted into ordinary shares or can be settled in cash.

The liability component of a compound financial instrument is recognised initially at the fair value of a similar

liability that does not have an equity conversion option. The equity component is recognised initially at the difference between the fair value of the compound financial instrument as a whole and the fair value of the liability component. Any directly attributable transaction costs are allocated to the liability and equity components in proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at

amortised cost using the effective interest method. The equity component of a compound financial instrument is not re-measured subsequent to initial recognition except on conversion or expiry.

4.23 Provisions

Provisions for environmental restoration, restructuring costs and legal claims are recognised when: (i) the Company has a present legal or constructive obligation as a result of past events; (ii) it is probable that an outflow of resources shall be required to settle the obligation; and (iii) the amount has been reliably estimated. Restructuring provisions include lease termination penalties and employee termination payments and such

other costs that are necessarily entailed by the restructuring and not associated with on going activities of the Company. Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow shall be required in settlement is

determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation

using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to passage of time is recognised as interest expense.


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6. Reserves

Movement in and composition of reserves is as follows:

Capital

Share premium 6.1 2,876,893 2,876,893

Fair value reserve At the beginning of the year 9,141,841 4,681,548 Fair value gain during the year 4,146,349 4,460,293

6.2 13,288,190 9,141,841

16,165,083 12,018,734 Revenue

General reserve At the beginning of the year 16,160,333 16,660,333 Transferred to profit and loss account (1,250,000) (500,000)

14,910,333 16,160,333

31,075,416 28,179,067 6.1 This reserve can be utilised by the Company only for the purposes specified in section 83(2) of The Companies

Ordinance, 1984.

6.2 As referred to in note 4.6 this represents the unrealised gain on re-measurement of investments at fair value and is not available for distribution. This shall be transferred to profit and loss account on derecognition of investments.


7. Long-term finances

These are composed of:

Local currency loans - secured

Consortium Loan 7.1.1 - 5,185,714

Term Finance Loan 7.1.2 1,000,000 1,000,000

Long-term Finance Facility 7.1.3 2,000,000 -

Others 7.1.4 - 300,000

3,000,000 6,485,714

Preference shares / convertible stock - unsecured 7.2.0 2,470,577 2,470,577

5,470,577 8,956,291

Current portion shown under current liabilities (1,000,000) (380,952)

4,470,577 8,575,339

5. Issued, subscribed and paid up capital

2012 2011 2012 2011 (Number of shares) (Rupees in thousand)

33,603,295 33,603,295 Ordinary shares of Rs. 10 each fully paid in cash 336,033 336,033

148,780 148,780 Ordinary shares of Rs. 10 each issued as fully

paid for consideration other than cash 1,488 1,488

50,627,429 50,627,429 Ordinary shares of Rs. 10 each issued as fully

paid bonus shares 506,274 506,274

84,379,504 84,379,504 843,795 843,795

21,082,601 (2011: 20,556,650) ordinary shares of the Company are held by IGI Insurance Limited, an associated

undertaking.

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7.1 Local currency loans - secured

7.1.1 Consortium Loan

This loan had been obtained from a consortium of commercial banks led by MCB Bank Limited. It was secured by a first ranking exclusive hypothecation / equitable mortgage charge over all present and future fixed assets of the Company amounting to Rs. 6,914 million (2011: Rs. 6,914 million) in favour of MCB Bank Limited being security trustee on behalf of consortium. It carried mark up at six month Karachi Inter Bank Offered Rate (KIBOR) plus 1.35 per cent per annum and was payable in 11 unequal semi-annual installments that started in June 2012 and ending in June 2017. The effective mark up charged during the year ranges from 13.31 per cent to 13.38 per cent per annum. This loan has been prepaid by the Company during the year using proceeds of short-term finances as referred to in note 15.1.5.

7.1.2 Term Finance Loan

The Company had obtained a long-term loan from Bank Al-Habib Limited for expansion in its paper, paperboard manufacturing capacity. Out of the total disbursement, Rs. 578 million have been provided by Bank Al-Habib Limited through its own source and Rs. 422 million have been provided under the State Bank of Pakistan’s Long Term Finance Facility (LTFF). The entire amount is secured by a ranking charge over all present and future fixed assets of the Company amounting to Rs. 1,400 million (2011: Rs. 1,400 million) that has been subsequently modified. There is a pari passu charge over all present and future fixed assets of the Company amounting to Rs. 1,330 million (2011: Nil) in favour of Bank Al-Habib Limited (BAHL). The Company has prepaid this loan subsequent to the year end in March 2013.

7.1.2.1 Loan under Term Finance Facility (BAHL own source)

The loan was disbursed in tranches of Rs. 500 million, Rs. 47 million and Rs. 31 million on May 20, 2011, July 6, 2011 and December 30, 2011 respectively. It carries mark up at the rate of six month KIBOR plus 0.65 per cent per annum and is repayable within 7 years (including two years grace period) in 10 equal semi-annual installments starting on November 19, 2013, January 5, 2014 and June 29, 2014 respectively and ending on May 19, 2018, July 5, 2018 and December 29, 2018 respectively. However, owing to the decision of the Company to transfer the entire assets of its Kasur and Karachi operations to its wholly owned subsidiary, BSPL, the Company has prepaid the entire outstanding balance along with the mark up due thereon in March 2013. The effective mark up charged during the year ranges from 12.66 per cent to 12.69 per cent per annum.

7.1.2.2 Loan under Long-Term Finance Facility (under SBP-LTFF facility)

The loan obtained from Bank Al-Habib Limited under State Bank of Pakistan, Long-Term Finance Facility of Rs. 422 million is comprised of Rs. 338 million and Rs. 84 million disbursed on July 6 ,2011 and November 16, 2011 respectively. This carries a fixed mark up of 11.20 per cent per annum and is repayable within 7 years (including two years grace period) in 10 equal semi-annual installments starting on January 5, 2014 and May 15, 2014 respectively and ending on July 5, 2018 and November 15, 2018 respectively. However, owing to the decision of the Company to transfer the entire assets of its Kasur and Karachi operations to its wholly owned subsidiary, BSPL, the Company has prepaid the entire outstanding balance along with the mark up due thereon in March 2013.

7.1.3 Long-Term Finance Facility

This loan has been obtained from Meezan Bank Limited under the Islamic mode of finance as a Musharika. It is secured by a pari passu charge over all present and future fixed assets of the Company amounting to Rs. 2,500 million. It carries mark up at six month KIBOR plus 0.65 per cent per annum and is repayable in 7 equal semi-annual installments starting in December 26, 2016 and ending December 28, 2019. The effective mark up charged during the year is 10.07 per cent per annum.

7.1.4 Others

This loan had been obtained from Citibank. It was secured by a first ranking exclusive hypothecation / equitable mortgage charge over all present and future fixed assets of the Company amounting to Rs. 419 million (2011: Rs. 419 million) in favour of MCB Bank Limited being security trustee on behalf of Citibank. It carried mark up at six month KIBOR plus 0.90 per cent per annum and was payable in 4 unequal semi-annual installments that started in December 2011 and ending in June 2013. The effective mark up charged during the year ranges from 12.86 per cent to 12.93 per cent per annum. This loan has been prepaid by the Company during the year using proceeds of short-term finances as referred to in note 15.1.5.

7.2 Preference shares / convertible stock - unsecured

During the year 2009, the Company issued 10 per cent local currency non-voting cumulative preference shares / convertible stock at the rate of Rs. 190 per share amounting to USD 50 million equivalent to PKR 4,120.5 million under “Subscription Agreement” dated March 25, 2009 with IFC.

Terms of redemption / conversion

Each holder of preference shares / convertible stock shall have a right to settle at any time, at the option of holder, either in the form of fixed number of ordinary shares, one ordinary share for one preference share / convertible stock, or cash. The Company may, in its discretion, refuse to purchase the preference shares / convertible stock offered to it for purchase in cash. In case of refusal by the Company, preference shareholders shall have the right to either retain the preference shares / convertible stock or to convert them into ordinary shares. The preference shares / convertible stock can be held till perpetuity if preference shareholders do not opt for the conversion or cash settlement.


89

Rate of return

The preference shares / convertible stock holders have a preferred right of return at the rate of 10 per cent per annum on a cumulative basis till December 31, 2013 and thereafter, these shall become non-cumulative till the date of settlement

of preference shares / convertible stock either in cash or ordinary shares.

Preference shares / convertible stock are recognised in the balance sheet as follows:

(Rupees in thousand) 2012 2011

Face value of preference shares / convertible stock 4,120,500 4,120,500

Transaction costs (44,048) (44,048)

4,076,452 4,076,452

Equity component - classified under capital and reserves (1,605,875) (1,605,875)

Liability component - classified under long-term finances 2,470,577 2,470,577

Accrued return on preference shares / convertible stock

classified under accrued finance cost 412,050 412,050

The fair value of the liability component of the preference shares / convertible stock is calculated by discounting

cash flows at a rate of approximately 16.50 per cent till perpetuity which represents the rate of similar instrument

with no associated equity component. The residual amount, representing the value of the equity conversion

component, is included in shareholders equity as preference shares / convertible stock reserve.


8. Deferred income tax liabilities

The liability for deferred taxation comprises timing differences

relating to:

Accelerated tax depreciation 551,041 3,951,743

Unused tax losses (132,163) (1,684,974)

Minimum tax available for carry forward 8.1 - (203,745)

Provision for accumulating compensated absences (63,829) (54,219)

Provision for doubtful debts (18,508) (13,751)

Preference shares / convertible stock transaction cost -

liability portion 9,267 8,946

345,808 2,004,000

8.1 The Company has not adjusted the net deferred tax liability against aggregate tax credits of Rs. 566.842 million

(2011: Rs. 300.571 million) and Rs. 261.474 million (2011: Rs. 196.059 million) available to the Company under section 113 and section 65B of the Income Tax Ordinance, 2001 (‘Ordinance’) respectively and unused tax losses of Nil (2011: Rs. 132.163 million) in view of the management’s estimate that the Company may not be able to offset these against tax liability arising in respect of relevant business profits of future periods, before these expire / lapse. Tax credits under section 113 of the Ordinance amounting to Rs. 68.813 million, Rs. 183.823 million, Rs. 203.917 million and Rs. 110.288 million are set to lapse by the end of years ending on December 31, 2014, 2015, 2016 and 2017 respectively. Tax credit under section 65B of the Ordinance amounting to Rs. 190.334 million and Rs. 71.140 million shall lapse by the end of years ending on December 31, 2013 and 2014 respectively.


9. Retirement benefits

Classified under non-current liabilities

Pension fund 86,512 12,358

Classified under non-current assets

Gratuity fund 39,009 89,299

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Pension Fund Gratuity Fund

(Rupees in thousand) 2012 2011 2012 2011

The amounts recognised in the balance sheet are as follows: Fair value of plan assets 305,573 685,750 243,384 317,168 Present value of defined benefit obligation (582,032) (1,092,581) (273,734) (314,074) Unrecognised actuarial loss 189,947 394,473 69,359 86,205

(Liability) / asset as at December 31 (86,512) (12,358) 39,009 89,299 Net (liability) / asset as at January 1 (12,358) (167) 89,299 94,557 Charge to profit and loss account (132,248) (61,520) (66,156) (18,760) Contribution by the Company 58,094 49,329 15,866 13,502

Net (liability) / asset as at December 31 (86,512) (12,358) 39,009 89,299 The movement in the present value of defined benefit obligation is as follows: Present value of defined benefit obligation as at January 1 1,092,581 890,215 314,074 285,349 Service cost 31,488 33,979 18,448 18,693 Interest cost 132,649 122,923 35,664 38,724 Benefits paid (62,772) (55,192) (57,528) (27,201) Settlements (553,090) - (97,638) - Curtailment / settlement (gain) / loss (196,267) - 17,182 - Experience loss / (gain) 137,443 100,656 43,532 (1,491) Present value of defined benefit obligation as at December 31 582,032 1,092,581 273,734 314,074 The movement in fair value of plan assets is as follows: Fair value as at January 1 685,750 649,568 317,168 304,449 Expected return on plan assets 86,516 93,200 37,042 42,408 Company contributions 58,094 49,329 15,866 13,502 Employee contributions 17,428 14,803 - - Benefits paid (62,772) (55,192) (57,528) (27,201) Settlements (553,090) - (97,638) - Experience gain / (loss) 73,647 (65,958) 28,474 (15,990)

Fair value as at December 31 305,573 685,750 243,384 317,168 The amounts recognised in the profit and loss account are as follows: Current service cost 31,488 33,979 18,448 18,693 Interest cost for the year 132,649 122,923 35,664 38,724 Expected return on plan assets (86,516) (93,200) (37,042) (42,408) Contribution made by the employees (17,428) (14,803) - - Curtailment / settlement losses charged out of unrecognised actuarial losses 244,554 - 27,362 - (Gain) / loss on curtailment / settlement recongnised out of obligation (196,267) - 17,182 - Recognition of loss 23,768 12,621 4,542 3,751 Total included in salaries, wages and amenities 132,248 61,520 66,156 18,760

Plan assets are comprised as follows: Debt 133,829 327,260 263,133 235,911 Equity 471,744 185,409 71,210 79,897 Cash 253,090 173,081 6,679 1,360

858,663 685,750 341,022 317,168 Settlements (553,090) - (97,638) -

305,573 685,750 243,384 317,168


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(Rupees in thousand) 2012 2011 2010 2009 2008

As at December 31

Present value of defined benefit obligation 582,032 1,092,581 890,215 767,086 595,808

Fair value of plan assets 305,573 685,750 649,568 592,086 493,088

Deficit (276,459) (406,831) (240,647) (175,000) (102,720)

Experience adjustment on obligation 13% 11% 5% 6% 1%

Experience adjustment on plan assets 11% -10% 0% 5% -51%

Fair value of plan assets include ordinary shares of the Company, whose fair value as at December 31, 2012 is

Rs. 99.771 million (2011: Rs. 54.598 million).

The present value of defined benefit obligation, the fair value of plan assets and the surplus of gratuity fund is as follows:


As at December 31

Present value of defined benefit obligation 273,734 314,074 285,349 247,893 211,836


(Deficit) / Surplus (30,349) 3,094 19,100 55,532 71,638

Experience adjustment on obligation 14% -1% 9% 5% 9%

Experience adjustment on plan assets 9% -5% -3% -1% -10%

Fair value of plan assets include ordinary shares of the Company, whose fair value as at December 31, 2012 is

Rs. 15.795 million (2011: Rs. 8.644 million). (Rupees in thousand) Note 2012 2011

10. Deferred liabilities

This represents provision made to cover the obligation for

accumulating compensated absences.

Opening balance 161,795 149,173

Provision for the year 50,740 23,146

212,535 172,319

Payments made during the year (28,670) (10,524)

183,865 161,795

Settlement to be made for employees of Discontinued

operations shown under accrued liabilities 10.1 (62,804) -

Closing balance 121,061 161,795

10.1 This represents the obligations in respect of employees that are to be transferred to BSPL under the JV Agreement

referred to in note 1 to these financial statements. Since this amount is to be settled by the Company before

equity participation by Stora Enso into BSPL, it has been classified as a current liability and included in trade and

other payables as referred to in note 13.2 to these financial statements.


11. Finances under mark up arrangements - secured

Running finances - secured 11.1 225,883 196,227

Bills discounted - secured 11.2 - -

Short-term finances - secured 11.3 583,059 600,000

808,942 796,227

The present value of defined benefit obligation, the fair value of plan assets and the deficit or surplus of pension fund is as follows:

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11.1 Running finances - secured

Short-term running finances available from a consortium of commercial banks under mark up arrangements amount to Rs. 7,790 million (2011: Rs. 7,290 million). The rates of mark up range from Re. 0.2638 to Re. 0.3622 per Rs. 1,000 per diem or part thereof on the balances outstanding. In the event the Company fails to pay the balances on the expiry of the quarter, year or earlier demand, mark up is to be computed at the rates ranging from Re. 0.5479 to Re. 0.6849 per Rs. 1,000 per diem or part thereof on the balances unpaid. The aggregate running finances are secured by hypothecation of stores, spares, stock-in-trade and trade debts.

11.2 Bills discounted - secured

Facilities for discounting of export / inland bills of Rs. 581 million (2011: Rs. 581 million) are available to the Company as a sub-limit of the running finance facilities referred to in note 11.1. Mark up is fixed as per mutual agreement at the time of transaction. The outstanding balance of bills discounted is secured, in addition to the securities referred to in note 11.1, on the specific bills discounted. The facility has not been availed in the current year.

11.3 Short-term finances - secured

Facilities for obtaining short-term finances of Rs. 6,565 million (2011: Rs. 5,615 million) are available to the Company as a sub-limit of the running finance facilities referred to in note 11.1. The rates of mark up range from Re. 0.2569 to Re. 0.3348 per Rs. 1,000 per diem or part thereof on the balances outstanding.

11.4 Letters of credit and bank guarantees

Of the aggregate facility of Rs. 6,733 million (2011: Rs. 5,619 million) for opening letters of credit and Rs. 1,294 million (2011: Rs. 1,294 million) for guarantees, the amount utilised at December 31, 2012 was Rs. 852.874 million (2011: Rs. 572.814 million) and Rs. 606.653 million (2011: Rs. 621.581 million) respectively. Of the facility for guarantees, Rs. 1,294 million (2011: Rs. 1,294 million) is secured by second hypothecation charge over stores, spares, stock-in-trade and trade debts.

12. Derivative financial instruments

Liability in respect of arrangements under the JV Agreement

This represents amount in respect of arrangements under the JV Agreement between the Company and Stora Enso referred to in note 1; which provide Stora Enso the right, in case certain conditions specified in the JV Agreement are not met, and obligates Stora Enso, in case certain conditions specified in the JV Agreement are met, to subscribe to the share capital of BSPL. A key condition of such right and obligation relates to the envisaged Joint Venture achieving specified EBITDA, to which the subscription price is also linked. It is included in the loss recognised on re-measurement

of the disposal group classified as held for sale referred to in note 15.1.2.


13. Trade and other payables

Trade creditors 13.1 863,366 821,380

Accrued liabilities 13.2 684,022 576,677

Bills payable 171,271 27,210

Retention money payable 59,250 59,250

Sales tax payable 80,061 88,340

Advances from customers 13.3 49,623 83,627

Deposits - interest free repayable on demand 11,136 15,021

TFCs payable 1,387 1,387

Unclaimed dividends 12,448 11,923

Others 44,934 46,440

1,977,498 1,731,255

13.1 Trade creditors include amounts due to related parties Rs. 170.458 million (2011: Rs. 109.335 million).

13.2 Accrued liabilities include amounts in respect of related parties Rs. 15.788 million (2011: Rs. 13.544 million). It also includes an amount of Rs. 62.804 million (2011: Nil) as referred to in note 10.1.

13.3 Advances from customers include amounts from related party Rs. 0.911 million (2011: Rs. 10.313 million).


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14. Accrued finance costs

Accrued mark up / return on:

Long-term local currency loans - secured 49,438 103,109

Preference shares / convertible stock - unsecured 412,050 412,050

Finances under mark up arrangements - secured 69,013 18,862

530,501 534,021

15. Disposal group classified as held for sale and Discontinued operations

As more fully explained in note 1 to these financial statements, the disposal group comprises of the Paper & Paperboard and Corrugated business operations at Kasur and Karachi. The assets and liabilities of this disposal group have been separately classified as held for sale in note 15.1. In connection with this the profit and loss account for these operations have also been separately classified as a Discontinued operation in note 15.2.

Moreover, the Discontinued operations also include the Paper and Paperboard operations in Lahore that have been discontinued during the year, the profit and loss account of which is separately presented in note 15.2.

(Rupees in thousand) Note 2012

15.1 Assets and liabilities of disposal group classified as held for sale

a) Assets classified as held for sale

Operating assets 15.1.1 10,249,450

Capital work-in-progress 162,365

Intangible assets 10,021

Stores and spares 695,153

Stock-in-trade 3,426,302

Total assets of the disposal group 14,543,291

b) Liabilities directly associated with assets classified as held for sale

Deferred income tax liabilities 15.1.4 551,513

Short-term finances - secured 15.1.5 5,100,000

Other payables 17,684

Total liabilities of the disposal group 5,669,197

15.1.1 Operating assets

Assets of disposal group classified as held for sale as at September 30, 2012 14,672,768

Net book value of additions till December 31, 2012 32,402

Net book value of deletions till December 31, 2012 (1,591)

14,703,579

Loss recognised on the re-measurement of assets of disposal group 15.1.2 (4,454,129)

Carrying value as on December 31, 2012 10,249,450

15.1.2 Loss recognised on the re-measurement of assets of disposal group

This represents the difference between the carrying values of net assets to be transferred to BSPL and the

estimated fair value thereof in the form of Company’s interest in the envisaged Joint Venture, net of the amount

as described in note 12.

15.1.3 Included in property, plant and equipment, there are certain capital expenditure incurred by the Company subsequent

to the signing of the JV Agreement, which the Company believes are reimbursable by BSPL under the terms of the JV

Agreement subject to consent of Stora Enso. The Company has claimed Rs. 226 million in this respect, and discussion

are in progress with Stora Enso for their approval. However, no receivable has been recognised in these financial

statements in respect of the above mentioned amount as the matter is in process of being finalised.

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(Rupees in thousand) 2012

15.1.4 Deferred income tax liabilities

The liability for deferred taxation comprises temporary differences relating to:

Accelerated tax depreciation 2,011,843

Un-absorbed tax depreciation (1,460,330)

551,513

The tax losses as at December 31, 2012 transferable to BSPL are estimated approximately at Rs. 4,172.371 million

(2011: Rs. 4,802.733 million).

15.1.5 Short-term finances - secured

This represents a short-term loan obtained from MCB Bank Limited and Allied Bank Limited to repay the

Consortium Loan referred to in note 7.1.1 and loan from Citibank referred to in note 7.1.4. It is secured against

pledge of 2,100,000 shares of Nestle Pakistan Limited as referred to in note 20.4. It carries mark up at three month

KIBOR plus 0.75% per annum and is repayable on June 5, 2013. The effective mark up charged during the year is

10.18 per cent per annum.

15.1.6 Commitments in respect of disposal group classified as held for sale

(i) Letters of credit and contracts for capital expenditure Rs. 2.242 million (2011: Nil).

(ii) Letters of credit and contracts other than for capital expenditure Rs. 369.488 million (2011: Nil).

(iii) The amount of future payments under operating leases and the period in which these payments shall become

due are as follows:


Not later than one year 346 305

Later than one year and not later than five years 268 392

614 697


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15.2 Profit and loss account - Discontinued operations

Paper & Paperboard and Paper & Paperboard Corrugated business operations operations at Kasur and Karachi at Lahore Total

2012 2011 2012 2011 2012 2011(Rupees in thousand) Note Represented Represented Represented

Local sales 10,039,377 8,834,315 42,002 212,521 10,081,379 9,046,836

Export sales 27,642 52,730 - 87,781 27,642 140,511

10,067,019 8,887,045 42,002 300,302 10,109,021 9,187,347

Less: Sales tax and excise duty 1,357,088 1,283,810 3,523 31,314 1,360,611 1,315,124

Commission 34 1,092 - - 34 1,092

1,357,122 1,284,902 3,523 31,314 1,360,645 1,316,216

8,709,897 7,602,143 38,479 268,988 8,748,376 7,871,131

Sales to Continuing operations 1,954,155 1,559,692 - - 1,954,155 1,559,692

10,664,052 9,161,835 38,479 268,988 10,702,531 9,430,823

Cost of sales (10,149,138) (10,193,212) (294,164) (288,487) (10,443,302) (10,481,699)

Gross profit / (loss) 514,914 (1,031,377) (255,685) (19,499) 259,229 (1,050,876)

Administrative expenses 15.2.1 (352,349) (263,810) (40,879) (64,978) (393,228) (328,788)

Distribution and marketing costs (186,631) (146,740) (16,718) (29,948) (203,349) (176,688)

Other operating expenses (38,472) (18,895) (15,942) (1,066) (54,414) (19,961)

Other operating income 36,729 32,060 7,963 32,988 44,692 65,048

Loss from operations (25,809) (1,428,762) (321,261) (82,503) (347,070) (1,511,265)

Finance costs (974,093) (988,600) (3,411) (13,061) (977,504) (1,001,661)

Loss before tax from

Discontinued operations (999,902) (2,417,362) (324,672) (95,564) (1,324,574) (2,512,926)

Taxation 154,092 756,093 113,828 28,155 267,920 784,248

Loss after tax from

Discontinued operations (845,810) (1,661,269) (210,844) (67,409) (1,056,654) (1,728,678)

Loss before tax recognised on the

re-measurement of assets of disposal group (4,618,688) - - - (4,618,688) -

Taxation 1,616,541 - - - 1,616,541 -

Loss after tax recognised on the


Loss for the year from Discontinued operations (3,847,957) (1,661,269) (210,844) (67,409) (4,058,801) (1,728,678)

15.2.1 Included in administrative expenses of Paper & Paperboard and Corrugated business operations at Kasur and Karachi

is an amount of Rs. 5.613 million (2011: Nil) and Rs. 7.338 million (2011: Nil) on account of legal and professional

services and travelling respectively in respect of transaction referred to in note 1 to these financial statements.

15.3 Cash flows from Discontinued operations


2012 2011 2012 2011 2012 2011(Rupees in thousand) Represented Represented Represented

Cash flows from operating activities (523,873) (2,082,984) 162,046 805,345 (361,827) (1,277,639)

Cash flows from investing activities (173,772) (1,153,303) 49,160 28,081 (124,612) (1,125,222)

Cash flows from financing activities (5,485,714) 985,714 - - (5,485,714) 985,714

Total cash flows (6,183,359) (2,250,573) 211,206 833,426 (5,972,153) (1,417,147)

96

16. Contingencies and commitments

16.1 Contingencies

(i) Claims against the Company not acknowledged as debts Rs. 25.860 million (2011: Rs. 18.612 million).

(ii) Post dated cheques not provided in the financial statements have been furnished by the Company in favour of

the Collector of Customs against custom levies aggregated to Rs. 217.102 million (2011: Rs. 102.219 million)

in respect of goods imported.

16.2 Commitments in respect of

(i) Letters of credit and contracts for capital expenditure Rs. 81.017 million (2011: Rs. 310.397 million).

(ii) Letters of credit and contracts other than for capital expenditure Rs. 618.740 million (2011: Rs. 433.814 million).

(iii) The amount of future payments under operating leases and Ijarah financing and the period in which these

payments shall become due are as follows:


Not later than one year 170,192 191,388 Later than one year and not later than five years 495,581 813,699

665,773 1,005,08717. Property, plant and equipment

Operating assets 17.1 3,068,122 18,220,375 Capital work-in-progress 17.2 390,993 125,683

3,459,115 18,346,058

17.1 Operating assets

2012

Assets of Accumulated Depreciation Assets of Accumulated Book value Cost as at disposal group Cost as at depreciation charge / disposal group depreciation as at December Additions / Transfer in classified December as at December (deletions) Transfer in classified as at December December 31, 2011 (deletions) (note 18) as held for sale 31, 2012 31, 2011 for the year (note 18) as held for sale 31, 2012 31, 2012


Freehold land 311,489 - - (105,167) 206,322 - - - - - 206,322

-

Buildings on freehold land 3,143,215 8,236 - (2,818,001) 333,450 518,783 89,669 - (479,886) 128,566 204,884

-

Buildings on leasehold land 167,545 3,072 9,936 - 180,553 76,232 6,305 7,095 - 89,632 90,921

-

Plant and machinery 23,672,350 711,401 - (16,899,351) 7,217,202 8,774,709 1,062,638 - (4,738,318) 4,899,860 2,317,342

(267,198) (199,169)

Other equipments (computers, lab

equipments and other office equipments) 495,048 56,443 - (78,374) 468,221 361,694 50,922 - (46,001) 361,933 106,288

(4,896) (4,682)

Furniture and fixtures 19,318 - - (5,923) 13,370 14,716 729 - (2,769) 12,651 719

(25) (25)

Vehicles 317,572 69,334 - (87,875) 244,186 160,028 32,227 - (54,949) 102,540 141,646

(54,845) (34,766)

28,126,537 848,486 9,936 (19,994,691) 8,663,304 9,906,162 1,242,490 7,095 (5,321,923) 5,595,182 3,068,122

(326,964) (238,642)


97

2011

Assets written Accumulated Depreciation Assets written Accumulated Book value Cost as at off due to Cost as at depreciation charge / off due to depreciation as at December Additions / fire December as at December (deletions) fire as at December December 31, 2010 (deletions) Transfer in (note 17.1.4) 31, 2011 31, 2010 for the year Transfer in (note 17.1.4) 31, 2011 31, 2011


Freehold land 321,330 2,185 - - 311,489 - - - - - 311,489

(12,026)

Buildings on freehold land 3,172,258 30,089 - (58,832) 3,143,215 416,421 128,627 - (25,965) 518,783 2,624,432

(300) (300)

Buildings on leasehold land 179,494 - - (11,949) 167,545 74,796 6,808 - (5,372) 76,232 91,313

Plant and machinery 22,373,894 1,979,180 - (193,420) 23,672,350 7,987,294 1,378,909 - (104,275) 8,774,709 14,897,641

(487,304) (487,219)


equipments and other office equipments) 463,151 42,345 - (5,453) 495,048 320,867 50,372 - (4,915) 361,694 133,354

(4,995) (4,630)

Furniture and fixtures 19,318 - - - 19,318 13,704 1,012 - - 14,716 4,602

Vehicles 285,897 59,414 - - 317,572 140,774 37,293 - - 160,028 157,544

(27,739) (18,039)

26,815,342 2,113,213 - (269,654) 28,126,537 8,953,856 1,603,021 - (140,527) 9,906,162 18,220,375

(532,364) (510,188)

17.1.1 Property, plant and equipment include assets amounting to Rs. 43.498 million (2011: Rs. 83.515 million) of the

Company which are not in operation.

17.1.2 The cost of fully depreciated assets which are still in use as at December 31, 2012 is Rs. 3,785.491 million (2011:

Rs. 3,385.397 million).

17.1.3 The depreciation charge for the year has been allocated as follows:

Discontinued operations Discontinued Paper & Paperboard and operations Corrugated business Paper & Paperboard Continuing operations at Kasur and Karachi at Lahore Total

(Rupees in thousand) Note 2012 2011 2012 2011 2012 2011 2012 2011

Cost of sales 28 327,956 294,072 852,967 1,229,216 34,003 55,071 1,214,926 1,578,359

Administrative

expenses 29 10,858 9,596 7,493 6,371 1,140 1,399 19,491 17,366

Distribution and

marketing costs 30 5,757 5,082 1,595 1,516 721 698 8,073 7,296

344,571 308,750 862,055 1,237,103 35,864 57,168 1,242,490 1,603,021

17.1.4 During the last year fire at the tissue conversion line and stores damaged certain items of property, plant and equipment

with an aggregate book value of Rs. 129.127 million. The Company had claimed such loss from its insurance providers

in accordance with the relevant insurance policies as referred to in note 33.2.

98

17.1.5 Disposal of property, plant and equipment

Detail of property, plant and equipment disposed off during the year is as follows: (Rupees in thousand) 2012

Particulars Accumulated Sales Mode of

of assets Sold to Cost depreciation Book value proceeds disposal

Plant and machinery Outsiders

Pak Board Mill, Muhammad Amin Dogar, Jutt Brothers, Boss Links 181,508 113,479 68,029 46,502 Negotiation Other Equipments Outsiders

M/s. Iqbal Jutt 650 509 141 173 Negotiation Vehicles Employees

Abida Akram 477 346 131 253 Company Policy Adnan Tufail 402 296 106 192 -do- Ali Hassan Siddique 495 142 353 358 -do- Ali Usman Awan 725 278 447 568 -do- Amad Ud Din 579 326 253 212 -do- Amir Janjua 979 710 269 590 -do- Ammarah Javed Agha 581 93 488 498 -do- Arslan Tauheed Abbasi 495 99 396 421 -do- Asma Yousaf 476 345 131 247 -do- Ataunnoor Ahmad 381 285 96 169 -do- Athar Riaz 615 454 161 365 -do- Attia Jamal 617 463 154 337 -do- Ayaz Haseeb 360 270 90 160 -do- Babar Hussain 849 637 212 556 -do- Behram Nazir 414 233 181 219 -do- Faraz Zafar 707 64 643 601 -do- Farhan M.Jaffer 716 105 611 629 -do- Farid Ahmad 1,269 555 714 980 -do- Haseeb Riaz 519 97 422 420 -do- Hassan Ahmed Mughal 384 245 139 202 -do- Iftikhar Ahmad 705 529 176 439 -do- Iftikhar Ahmad 1,232 462 770 875 -do- Ijaz Ahmad 988 580 408 629 -do- Ishtiaq Ur Rehman 385 231 154 203 -do- Jananzeb Khan 1,157 868 289 807 -do- Kamal Bariq 401 291 110 191 -do- Kamran Jamshed 850 425 425 485 -do- Khalid Bin Yousaf 700 236 464 515 -do- Khalid Mehmood 800 340 460 572 -do- Majeed Ghani 585 307 278 362 -do- Mian Javaid Iqbal 820 595 225 532 -do- Mudussar Anjum 384 259 125 177 -do- Muhammad Tariq 427 320 107 207 -do- Muhammad Ahmad 665 283 382 450 -do- Muhammad Amin 374 266 108 169 -do- Muhammad Anis 643 113 530 511 -do- Muhammad Faraz 396 262 134 208 -do- Muhammad Usman Akram 480 222 258 256 -do- Mustansar Bashir 475 339 136 251 -do- Naeem Shaukat 1,000 300 700 821 -do- Nauman Majeed Khan 1,318 264 1,054 952 -do- Naveed Ehsaan 859 268 591 689 -do- Omer Qureshi 366 275 91 138 -do- Rameez Jahangir 754 68 686 646 -do- Rana Sher Afghan 610 130 480 465 -do- Carried Forward 211,572 128,264 83,308 66,202


99




Brought Forward 211,572 128,264 83,308 66,202

Vehicles Sajjad Iftikhar 576 425 151 255 Company Policy

Samreen Saleem 362 258 104 161 -do-

Shabir Hussain 564 310 254 353 -do-

Shahida Naeem 940 693 247 630 -do-

Shoaib Nangiana 571 428 143 589 Negotiation

Shoaib Saleem 479 317 162 255 Company Policy

Syed Ahmad Mujtaba 360 270 90 160 -do-

Syed Babar Hussain 549 99 450 460 -do-

Tahir Mahmood 380 285 95 174 -do-

Usman Ghani 660 289 371 446 -do-

Usman Tahir 463 168 295 286 -do-

Zaid Ashraf Nizami 498 137 361 361 -do-

Outsiders

Adnan Rafique Qureshi 900 675 225 860 Negotiation

IGI Insurance Limited - Related Party 4,706 1,621 3,085 4,329 Insurance Claim

Maheen Saqib 916 687 229 800 Negotiation

Maswar Subhani 1,072 804 268 725 -do-

Other assets with

book value less

than Rs. 50,000 204,045 203,970 75 36,718

429,613 339,700 89,913 113,764

100


Particulars Accumulated Sales Mode ofof assets Sold to Cost depreciation Book value proceeds disposal

Land Outsiders

Haji Muhammad Ibrahim and others 12,026 - 12,026 143,550 Negotiation

Buildings Outsiders




Muhammad Amin 476,063 475,979 84 28,810 Negotiation

Other Equipments Outsiders

IGI Insurance Limited - Related Party 5,453 4,915 538 2,131 Insurance Claim

IGI Insurance Limited - Related Party 737 530 207 198 Insurance Claim

Packages Lanka (Private) Limited -

Related Party 72 16 56 72 Negotiation

Vehicles Employees

Adnan Yousaf 487 134 353 352 Company policy

Akhtar Javed 618 456 162 368 -do-

Almaee Hassan Jafri 1,278 208 1,070 1,071 -do-

Dr. Arshad Mahmood 1,349 590 759 983 -do-

Ehtisham Qureshi 520 390 130 288 -do-

Faisal Amjad 403 302 101 192 -do-

Ghulam Sarwar 610 267 343 434 -do-

Hafiz Farhan Muhammad Jaffar 372 270 102 167 -do-

Ishtiaq Ahmad 507 342 165 277 -do-

Javed Iqbal 368 258 110 164 -do-

Maheen Saqib 467 157 310 359 -do-

Mehreen Bilal 366 192 174 191 -do-

Mohammad Yasin 507 349 158 310 -do-

Muhammad Ali 480 348 132 255 -do-

Muhammad Farhan 450 321 129 231 -do-

Muhammad Haroon 329 247 82 650 Negotiation

Muhammad Imran Aziz 610 168 442 469 Company policy

Muhammad Ismail 625 461 164 373 -do-

Muhammad Naveed 354 252 102 157 -do-

Muhammad Rizwan 841 630 211 549 -do-

Muhammad Uffan Sharif 525 394 131 292 -do-

Muhammad Umar Rashid 523 392 131 290 -do-

Sajjad Hussain 623 467 156 372 -do-

Sajjad Nadeem 515 386 129 284 -do-

Shoaib Kazi 697 61 636 631 -do-

Suleman Javed 825 608 217 464 -do-

Syed Haris Raza 520 273 247 321 -do-

Syed Ihsanullah Shah 402 302 100 192 -do-

Syed Kashif Alam 375 239 136 170 -do-

Zafar Ahmad 700 105 595 617 -do-

Outsiders

DIC Pakistan Limited - Related Party 1,500 506 994 1,218 Negotiation

Muhammad Jawaid 4,037 3,009 1,028 392 - do -

Other assets with

book value less

than Rs. 50,000 15,081 14,977 104 4,311

802,018 650,715 151,303 365,436


101

2011

Accumulated Accumulated Book value Cost as at Cost as at depreciation Depreciation depreciation as at December December as at December charge as at December December 31, 2010 Transfer out 31, 2011 31, 2010 for the year Transfer out 31, 2011 31, 2011


Land 8,594 - 8,594 - - - - 8,594

Buildings on freehold land 6,296 - 6,296 3,563 421 - 3,984 2,312

Buildings on leasehold land 38,808 - 38,808 18,547 1,224 - 19,771 19,037

53,698 - 53,698 22,110 1,645 - 23,755 29,943

18.1 Depreciation charge for the year has been allocated to administrative expenses as referred to in note 29.

18.2 Fair value of the investment property, based on the valuation carried out by an independent valuer, as at December

31, 2012 is Rs. 153.334 million (2011: Rs. 171.926 million).

18. Investment property 2012

Accumulated Accumulated Book value Cost as at Cost as at depreciation Depreciation depreciation as at December Transfer out December as at December charge Transfer out as at December December 31, 2011 (note 17.1) 31, 2012 31, 2011 for the year (note 17.1) 31, 2012 31, 2012


Land 8,594 - 8,594 - - - - 8,594

Buildings on freehold land 6,296 - 6,296 3,984 420 - 4,404 1,892

Buildings on leasehold land 38,808 (9,936) 28,872 19,771 1,209 (7,095) 13,885 14,987

53,698 (9,936) 43,762 23,755 1,629 (7,095) 18,289 25,473


17.2 Capital work-in-progress

Civil works 172,830 15,784

Plant and machinery [including in transit Rs. 95.652 million (2011: Nil)] 197,731 105,571

Others 246 235

Advances 20,186 4,093

390,993 125,683

17.2.1 During the last year fire at the tissue conversion line and stores damaged certain items of capital work-in-progress with an aggregate book value of Rs. 2.679 million. The Company had claimed such loss from its insurance providers in accordance with the relevant insurance policies as referred to in note 33.2.


19. Intangible assets

These represent computer software and ERP system.

Cost

As at January 1 165,620 126,959

Additions 11,668 38,661

Deletions (637) -

As at December 31 176,651 165,620

Accumulated amortisation

As at January 1 (126,732) (124,567)

Amortisation for the year 19.1 (9,145) (2,165)

Deletions 637 -

As at December 31 (135,240) (126,732)

41,411 38,888

102


19.1 The amortisation charge for the year has been allocated as follows:


Cost of sales 28 194 12 Administrative expenses 29 4,789 1,409

4,983 1,421 Discontinued operations

Administrative expenses 4,162 744

9,145 2,16520. Investments

These represent the long-term investments in: Related parties 20.1 3,507,540 3,146,370 Other long-term investments 20.3 17,288,120 13,141,771

20,795,660 16,288,141 20.1 Related parties

Subsidiaries - unquoted

Bulleh Shah Packaging (Private) Limited [formerly Bulleh Shah Paper Mill (Private) Limited]

900 (2011: Nil) fully paid ordinary shares of Rs. 10 each Equity held 100.00% (2011: Nil) 9 - DIC Pakistan Limited

3,377,248 (2011: 3,377,248) fully paid ordinary shares of Rs. 10 each Equity held 54.98% (2011: 54.98%) 15,010 15,010 Packages Construction (Private) Limited

2,500,000 (2011: 2,500,000) fully paid ordinary shares of Rs. 10 each Equity held 99.99% (2011: 99.99%) 19,090 19,090 Packages Lanka (Private) Limited

44,698,120 (2011: 44,698,120) shares of SL Rupees 10 each Equity held 79.07% (2011: 79.07%) 442,938 442,938 477,047 477,038

Associates

Quoted

IGI Insurance Limited

11,838,267 (2011: 11,838,267) fully paid ordinary shares of Rs. 10 each Equity held 10.61% (2011: 10.61%) Market value - Rs. 1,139.788 million (2011: Rs. 523.488 million) 20.1.1 878,378 523,488 Tri-Pack Films Limited

10,000,000 (2011: 10,000,000) fully paid ordinary shares of Rs. 10 each Equity held 33.33% (2011: 33.33%) Market value - Rs. 1,920 million (2011: Rs. 1,603 million) 20.2 2,141,233 2,141,233 IGI Investment Bank Limited

4,610,915 (2011: 4,610,915) fully paid ordinary shares of Rs. 10 each Equity held 2.17% (2011: 2.17%) Market value - Rs. 10.882 million (2011: Rs. 4.150 million) 20.1.1 10,882 4,611

3,030,493 2,669,332

3,507,540 3,146,370


103

20.1.1 The Company’s investment in IGI Insurance Limited and IGI Investment Bank Limited is less than 20% but they are considered to be associates as per the requirement of IAS 28 ‘Investments in Associates’ because the Company has significant influence over the financial and operating policies of these companies through representation on the board of directors of these companies.

The Company has recognised reversal of impairment losses in IGI Insurance Limited and IGI Investment Bank

Limited during the year of Rs. 354.890 million and Rs. 6.271 million respectively as referred to in note 36. 20.2 The Company has assessed the recoverable amount of investment in Tri-Pack Films Limited based on value in

use calculation. This calculation has been made on discounted cash flow methodology for real cash flows using a weighted average cost of capital of approximately 13%, cumulative annual growth rate of 15.27% in profit before tax till 2020 and terminal growth of Nil. Based on the above, the recoverable amount of investment in Tri-Pack Films Limited exceeds its existing carrying amount.


20.3 Others

Quoted

Nestle Pakistan Limited 3,649,248 (2011: 3,649,248) fully paid ordinary shares of Rs. 10 each Equity held 8.05% (2011: 8.05%) Market value - Rs. 17,273.095 million (2011: Rs. 13,126.746 million) 20.4 & 20.5 17,273,095 13,126,746 Unquoted

Tetra Pak Pakistan Limited 1,000,000 (2011: 1,000,000) fully paid non-voting shares of Rs. 10 each 20.5 10,000 10,000 Coca-Cola Beverages Pakistan Limited

500,000 (2011: 500,000) fully paid ordinary shares of Rs. 10 each Equity held 0.14% (2011: 0.14%) 5,000 5,000 Pakistan Tourism Development Corporation Limited

2,500 (2011: 2,500) fully paid ordinary shares of Rs. 10 each 25 25 Orient Match Company Limited

1,900 (2011: 1,900) fully paid ordinary shares of Rs. 100 each - -

15,025 15,025

17,288,120 13,141,771

20.4 2,100,000 shares (2011: Nil) of Nestle Pakistan Limited (market value: Rs. 9,939.993 million) are pledged with lenders of short-term finances facility as referred to in note 15.1.5.

20.5 Nestle Pakistan Limited and Tetra Pak Pakistan Limited are associated undertakings as per The Companies

Ordinance, 1984, however, for the purpose of measurement, investments in others have been classified as available for sale as referred to in note 4.6.


21. Long-term loans and deposits

Considered good Loans to employees 21.1 5,269 4,278 Loan to SNGPL 21.2 82,000 98,400 Security deposits 27,454 25,447

114,723 128,125 Receivable within one year Loans to employees 25 (1,218) (852) Loan to SNGPL 25 (16,400) (16,400)

(17,618) (17,252)

97,105 110,873

104

21.1 These represent interest free loans to employees for purchase of motor cycles and cycles and are repayable in monthly installments over a period of 60 to 260 months.

Loans to employees aggregating Rs. 3.008 million (2011: Rs. 2.125 million) are secured by joint registration of

motor cycles in the name of employees and the Company. The remaining loans are unsecured. 21.2 This represents an unsecured loan given to Sui Northern Gas Pipelines Limited (SNGPL) for the development of

the infrastructure for the supply of natural gas to the Kasur plant. Mark up is charged at the rate of 1.5% per annum and is received annually. The remaining amount is receivable in 5 annual installments.


22. Stores and spares

Stores [including in transit Rs. 6.328 million (2011: Rs. 11.444 million)] 261,120 571,039 Spares [including in transit Rs. 4.511 million (2011: Rs. 21.580 million)] 200,505 407,702

461,625 978,741

22.1 Stores and spares include items which may result in fixed capital expenditure but are not distinguishable and are net of an amount of Rs. 1.452 million (2011: Rs. 1.452 million) in respect of provision for slow moving stores and spares.

22.2 During the last year fire at the tissue conversion line and stores damaged certain items of stores and spares. The

carrying value of the assets damaged was Rs. 189.447 million. The Company had claimed such loss from its insurance providers as referred to in note 33.2.


23. Stock-in-trade

Raw materials [including in transit Rs. 194.250 million (2011: Rs. 243.329 million)]. 970,058 2,079,815 Work-in-process 243,018 256,593 Finished goods 696,731 2,189,349

1,909,807 4,525,757

23.1 Raw materials and finished goods with a cost of Nil (2011: Rs. 783.745 million) and Rs. 27.090 million (2011: Rs. 1,354.412 million) are being valued at net realizable value of Nil (2011: Rs. 653.129 million) and Rs. 23.864 million (2011: Rs. 1,092.969 million) respectively.

23.2 During the last year fire at the tissue conversion line and stores damaged certain items of stock-in-trade. The

carrying value of the assets damaged was Rs. 215.201 million. The Company had claimed such loss from its insurance providers as referred to in note 33.2.


24. Trade debts

Considered good Related parties - unsecured 24.1 16,311 8,725 Others 24.2 2,263,604 1,755,852

2,279,915 1,764,577 Considered doubtful 54,550 42,269

2,334,465 1,806,846 Provision for doubtful debts 24.3 (54,550) (42,269)

2,279,915 1,764,577

24.1 Related parties - unsecured

Subsidiary

DIC Pakistan Limited 4,190 2,766 Associate

Tri-Pack Films Limited 12,121 5,959

16,311 8,725

These are in the normal course of business and are interest free.


105

24.2 Others include debt of Rs. 264.286 million (2011: Rs. 210.034 million) which are secured by way of bank guarantees and inland letters of credit.


24.3 The movement in provisioin during the year is as follow:

Balance as at January 1 42,269 40,524 Provision during the year 30 12,281 8,092 Trade debts written off during the year - (6,347)

Balance as at December 31 54,550 42,269

25. Loans, advances, deposits, prepayments and other receiables

Current portion of loans to employees 21 1,218 852 Current portion of loan receivable from SNGPL 21 16,400 16,400 Advances - considered good To employees 25.1 22,514 12,167 To suppliers 40,729 52,255

63,243 64,422 Due from related parties - unsecured 25.2 14,700 14,358 Trade deposits 108,633 95,187 Prepayments 22,134 24,244 Balances with statutory authorities Customs duty 6,937 - Sales tax recoverable 13,970 10,307

20,907 10,307 Mark up receivable on Loan to SNGPL 64 77 Term deposits and saving accounts 348 838

412 915 Insurance claim receivable in respect of assets written off due to fire from IGI Insurance Limited - Related Party 89,412 172,791 Other receivables 75,807 55,072

412,866 454,548

25.1 Included in advances to employees are amounts due from executives of Rs. 6.615 million (2011: Rs. 1.299 million).


25.2 Due from related parties - unsecured

Subsidiaries DIC Pakistan Limited 9,966 8,542 Packages Lanka (Private) Limited 3,692 5,279 Bulleh Shah Packaging (Private) Limited [formerly Bulleh Shah Paper Mill (Private) Limited] 698 - Associates Tri-Pack Films Limited 63 59 IGI Insurance Limited 281 478

14,700 14,358 These are in the normal course of business and are interest free.

26. Income tax receivable

Income tax refundable 1,567,293 905,426 Income tax recoverable 26.1 36,013 36,013

1,603,306 941,439

106

26.1 In 1987, the Income Tax Officer (ITO) re-opened the Company’s assessments for the accounting years ended December 31, 1983 and 1984 disallowing primarily tax credit given to the Company under section 107 of the Income Tax Ordinance, 1979. The tax credit amounting to Rs. 36.013 million on its capital expenditure for these years was refused on the grounds that such expenditure represented an extension of the Company’s undertaking which did not qualify for tax credit under this section in view of the Company’s location. The assessments for these years were revised by the ITO on these grounds and taxes reassessed were adjusted against certain sales tax refunds and the tax credits previously determined by the ITO and set off against the assessments framed for these years.

The Company had filed an appeal against the revised orders of the ITO before the Commissioner of Income Tax

(Appeals) [CIT(A)], Karachi. CIT(A) in his order issued in 1988, held the assessments reframed by the ITO for the years 1983 and 1984 presently to be void and of no legal effect. The ITO has filed an appeal against the CIT(A)’s order with the Income Tax Appellate Tribunal (ITAT). The ITAT has in its order issued in 1996 maintained the order of CIT(A). The assessing officer after the receipt of the appellate order passed by CIT(A), had issued notices under section 65 of the Income Tax Ordinance, 1979 and the Company had filed a writ petition against the aforesaid notices with the High Court of Sindh, the outcome of which is still pending.

The amount recoverable Rs. 36.013 million represents the additional taxes paid as a result of the disallowance of

the tax credits on reframing of the assessments.


27. Cash and bank balances

At banks: On saving accounts [including Nil (2011: USD 29,177)] 27.1 259,947 76,858 On current accounts [including USD 1,042 (2011: USD 4,973)] 27.2 96,628 89,150

356,575 166,008 In hand 5,805 9,668

362,380 175,676 27.1 The balances in saving accounts bear mark up which ranges from 5.0 % to 11.65% per annum.

27.2 Included in these are total restricted funds of Rs. 1.332 million (2011: Rs. 1.332 million) held as payable to TFC holders.


28. Cost of sales

Materials consumed 7,406,733 7,282,395 Salaries, wages and amenities 28.1 871,950 665,034 Traveling 12,278 16,926 Fuel and power 920,546 747,907 Production supplies 232,923 250,062 Excise duty and sales tax 754 2,213 Rent, rates and taxes 28.2 313,037 346,809 Insurance 26,714 18,620 Repairs and maintenance 306,975 314,994 Packing expenses 42,044 52,337 Depreciation on property, plant and equipment 17.1.3 327,956 294,072 Amortisation of intangible assets 19.1 194 12 Technical fee and royalty 7,440 6,091 Other expenses 28.3 110,193 38,237

10,579,737 10,035,709 Opening work-in-process 250,247 207,082 Closing work-in-process (245,126) (250,247)

Cost of goods produced 10,584,858 9,992,544 Opening stock of finished goods 609,944 688,755

11,194,802 10,681,299 Closing stock of finished goods (808,604) (609,944)

10,386,198 10,071,355


107

Cost of goods produced includes Rs. 1,168.420 million (2011: Rs. 1,140.515 million) for stores and spares consumed, Rs. 36.838 million (2011: Rs. 30.837 million) and Rs. 2.672 million (2011: Nil) for raw material and stores and spares written off respectively.


28.1 Salaries, wages and amenities

Salaries, wages and amenities include following in respect of retirement benefits: Pension

Current service cost 9,037 8,941 Interest cost for the year 38,072 32,343 Expected return on plan assets (24,832) (24,522) Contribution made by the employees (5,002) (3,894) Net loss on curtailment / settlement 13,857 - Recognition of loss 6,823 3,320

37,955 16,188 Gratuity

Current service cost 7,188 5,429 Interest cost for the year 13,896 11,247 Expected return on plan assets (14,432) (12,317) Loss on settlement 17,356 - Recognition of loss 1,769 1,089

25,777 5,448 In addition to above, salaries, wages and amenities include Rs. 16.390 million (2011: Rs. 13.337 million) and

Rs. 20.222 million (2011: Rs. 4.926 million) in respect of provident fund contribution by the Company and accumulating compensated absences respectively.

28.2 Rent, rates and taxes include operating lease / ujrah rentals amounting to Rs. 303.095 million (2011: Rs. 344.456

million). 28.3 Other expenses include provision for slow moving stores and spares amounting to Nil (2011: Rs. 1.452 million).


29. Administrative expenses

Salaries, wages and amenities 29.1 179,222 148,937 Traveling 15,438 14,400 Rent, rates and taxes 29.2 9,917 7,025 Insurance 4,970 3,129 Printing, stationery and periodicals 12,578 11,415 Postage, telephone and telex 9,603 9,542 Motor vehicles running 12,438 12,190 Computer charges 9,237 8,876 Professional services 29.3 28,663 18,819 Repairs and maintenance 7,837 7,277 Depreciation on property, plant and equipment 17.1.3 10,858 9,596 Amortisation of intangible assets 19.1 4,789 1,409 Depreciation on investment property 18.1 1,629 1,645 Other expenses 38,511 32,549

345,690 286,809

Administrative expenses include Rs. 56.536 million (2011: Rs. 45.775 million) for stores and spares consumed.

108





15,741 7,205 Gratuity

Current service cost 1,857 1,825 Interest cost for the year 3,591 3,777 Expected return on plan assets (3,729) (4,137) Loss on settlement 4,485 - Recognition of loss 457 366

6,661 1,831 In addition to above, salaries, wages and amenities include Rs. 5.297 million (2011: Rs. 4.341 million) and

Rs. 5.028 million (2011: Rs. 3.052 million) in respect of provident fund contribution by the Company and accumulating compensated absences respectively.

29.2 Rent, rates and taxes include operating lease rentals amounting to Rs. 8.157 million (2011: Rs. 7.598 million).


29.3 Professional services

The charges for professional services include the following in respect of auditors’ services for: Statutory audit 2,400 2,000 Half yearly review 750 650 Tax services 3,300 5,151 Workers’ profit participation fund audit, management staff pension and gratuity fund audit, audit of consolidated financial statements and other certification charges 758 844 Out of pocket expenses 410 516

7,618 9,161 Charges for professional services rendered by the auditors relating to the Discontinued operations amount to



30. Distribution and marketing costs

Salaries, wages and amenities 30.1 122,723 98,069 Traveling 18,721 17,624 Rent, rates and taxes 30.2 8,374 2,380 Freight and distribution 109,786 107,713 Insurance 4,981 731 Advertising 96,870 117,800 Depreciation on property, plant and equipment 17.1.3 5,757 5,082 Provision for doubtful debts 24.3 12,281 8,092 Other expenses 36,828 28,489

416,321 385,980

Distribution and marketing cost include Rs. 4.042 million (2011: Rs. 2.846 million) for stores and spares consumed.


109



Salaries, wages and amenities include following in respect of retirement benefits:

Pension Current service cost 2,591 2,734 Interest cost for the year 10,916 9,894 Expected return on plan assets (7,119) (7,502) Contribution made by the employees (1,434) (1,192) Net loss on curtailment / settlement 3,974 - Recognition of loss 1,956 1,016

10,884 4,950 Gratuity


4,605 1,260

In addition to above, salaries, wages and amenities include Rs. 2.434 million (2011: Rs. 1.907 million) and Rs. 3.476 million (2011: Rs. 3.206 million) in respect of provident fund contribution by the Company and accumulating compensated absences respectively.

30.2 Rent, rates and taxes include operating lease rentals amounting to Rs. 6.572 million (2011: Rs. 3.343 million). 31. These represent expenses incurred on prospective projects which are not capitalised under International Financial

Reporting Standards.


32. Other operating expenses

Exchange loss - net 30,128 3,606 Donations 32.1 760 456

30,888 4,062

32.1 None of the directors and their spouses had any interest in any of the donees during the year.


33. Other operating income

Income from financial assets

Income on bank deposits 9,912 7,911 Interest on loan to SNGPL 1,463 1,709

11,375 9,620 Income from non-financial assets

Management and technical fee [including Rs. 16.751 million (2011: Rs. 18.557 million) from related party] 35,919 53,607 Insurance commission from related party 1,873 1,474 Rental income from investment property [including Rs.14.121 million (2011: Rs. 13.001 million) from related party] 33.1 35,092 49,811 Profit on disposal of property, plant and equipment 29,722 136,846 Net gain on insurance claim of assets written off due to fire 33.2 150,084 20,884 Scrap sales 90 98 Provisions and unclaimed balances written back 22,429 13,464 Others 1,908 3,477

277,117 279,661

288,492 289,281

110

33.1 The expenses directly relating to the income from investment property amount to Rs. 1.629 million (2011: Rs. 1.645 million).

33.2 As referred to in notes 17.1.4, 17.2.1, 22.2 and 23.2, during the last year a fire incident at the tissue conversion line and stores damaged certain items of property, plant and equipment, stores and spares and stock-in-trade. The Company filed the insurance claim in respect of these assets. The insurer had appointed a surveyor who completed his survey during the current year and assessed the insurance claim at Rs. 707.438 million including business interruption claim of Rs. 54.629 million. Out of the total claim the Company has received proceeds of Rs. 618.026 million from the insurers as of December 31, 2012.


Carrying value of assets written off due to fire

Property, plant and equipment

Buildings on freehold land 17.1 32,867 32,867 Buildings on leasehold land 17.1 6,577 6,577 Plant and machinery 17.1 89,145 89,145 Other equipments (computers, lab equipments and other office equipments) 17.1 538 538 Capital work-in-progress 17.2.1 2,679 2,679

131,806 131,806 Stores and spares 22.2 189,447 189,447 Stock-in-trade 23.2 215,201 215,201

Carrying value of assets written off due to fire 536,454 536,454 Insurance claim verified to date 707,438 557,354

Aggregate gain on insurance claim of assets written off due to fire 170,984 20,900 Gain recognised till previous year (20,900) -

Net gain recognised during the year 150,084 20,900

Continuing operations 150,084 20,884 Discontinued operations - 16

150,084 20,900

33.3 The future minimum lease payments receivable under non-cancellable operating leases are as follows:



23,837 28,03834. Finance costs

Interest and mark up including commitment charges on finances under mark up arrangements - secured 103,917 69,076 Return on preference shares / convertible stock 412,050 412,050 Loan handling charges 10,732 - Bank charges 1,672 2,523

528,371 483,64935. Investment income

Dividend income from related parties 35.1 310,470 220,546 Dividend income from others 1,223,970 816,709 Gain on sale of short-term investments 13 3,035

1,534,453 1,040,290

35.1 Dividend income from related parties

Subsidiaries

DIC Pakistan Limited 27,356 50,321 Packages Lanka (Private) Limited 23,923 34,386

Associates

IGI Insurance Limited 59,191 35,839 Tri-Pack Films Limited 200,000 100,000

310,470 220,546


111


36. Reversal of Impairment / (impairment) on investments

Subsidiary - unquoted

Packages Construction (Private) Limited - (5,910) Associates - quoted

IGI Insurance Limited 354,890 (354,890) IGI Investment Bank Limited 6,271 (30,389)

361,161 (391,189) This represents reversal of impairment / (impairment charged) on investments based on assessment of recoverable

amount. For quoted associates, the recoverable amount is equal to fair value which has been determined with reference to active market as at balance sheet date.


37. Taxation

Current Current year 68,000 129,000 Prior years (16,190) 40,196

51,810 169,196 Deferred 822,782 707,248

874,592 876,444

The current tax provision represents the minimum tax on turnover for the year due under Section 113 of the

Income Tax Ordinance, 2001.

For the purposes of current taxation, the tax losses available for carry forward as at December 31, 2012 are

estimated approximately at Rs. 4,549.980 million (2011: Rs. 5,180.342 million). Unused tax losses available to the

Continuing operations of the Company amount to Rs. 377.609 million (2011: Rs. 377.609 million).

2012 2011 %age %age Represented

37.1 Tax charge reconciliation

Numerical reconciliation between the average effective tax rate

and the applicable tax rate is as follows:

Applicable tax rate 35.00 35.00

Tax effect of amounts that are:

Not deductible for tax purposes 2.57 18.69

Exempt for tax purposes (6.25) (6.24)

Chargeable to tax at different rates (0.02) 0.50

Effect of change in prior years’ tax (0.73) 3.88

Tax credits and losses in respect of which no deferred tax asset

has been recognised 8.19 30.47

Tax effect under presumptive tax regime and others 0.60 2.20

4.36 49.50

Average effective tax rate charged to profit and loss account 39.36 84.50

112

38. Remuneration of Chief Executive, Directors and Executives

38.1 The aggregate amount charged in the financial statements for the year for remuneration, including certain

benefits, to the Chief Executive, full time working Directors and Executives of the Company are as follows:

Chief Executive Directors Executives

2012 2011 2012 2011 2012 2011

Number of persons 1 1 2 2 99 82


Short-term employee benefits

Managerial remuneration 10,020 8,539 14,805 12,624 127,180 93,445

Housing 3,960 3,337 6,106 5,145 63,957 46,695

Utilities 880 742 1,357 1,143 14,112 11,205

Bonus 2,567 2,164 3,959 3,336 49,439 37,287

Leave passage 1,927 1,039 1,633 1,065 4,766 4,647

Medical expenses 2,512 1,867 376 244 314 643

Club expenses 60 114 140 229 - 63

Others - - - - 22,271 17,394

21,926 17,802 28,376 23,786 282,039 211,379

Post employment benefits

Contribution to provident,

gratuity and pension funds 3,037 2,560 3,530 2,975 34,046 25,070

Other long-term benefits

Accumulating compensated absences 543 475 347 316 8,879 4,513

25,506 20,837 32,253 27,007 324,964 240,962

The Company also provides the Chief Executive and some of the Directors and Executives with free transport and

residential telephones.

38.2 Remuneration to other directors

Aggregate amount charged in the financial statements for the year for fee to 7 directors (2011: 7 directors) is

Rs. 935,000 (2011: Rs. 520,000).


113

39. Transactions with related parties

The related parties comprise subsidiaries, associates, directors, key management personnel and post employment

benefit plans. The Company in the normal course of business carries out transactions with various related parties.

Amounts due from and to related parties are shown under receivables and payables, amounts due from directors

and key management personnel are shown under receivables and remuneration of directors and key management

personnel is disclosed in note 38. Other significant transactions with related parties are as follows:


Relationship with the Company Nature of transactions

i. Subsidiaries Purchase of goods and services 811,579 898,801

Sale of goods and services 24,703 18,197

Sale of property, plant and equipment - 1,290

Investment 9 -

Dividend income 51,279 84,707

Rental income 14,121 13,001

Management and technical fee 16,751 18,557

ii. Associates Purchase of goods and services 815,352 757,176


Insurance premium 200,952 146,027

Commission earned 8,248 6,069

Insurance claims received 237,547 408,128


iii. Post employment benefit plans Expense charged in respect of retirement

benefit plans 233,298 110,600

Mark up on temporary loans - 46

All transactions with related parties have been carried out on commercial terms and conditions.

40. Capacity and production - tons Capacity Actual production

2012 2011 2012 2011

Paper and paperboard produced 271,400 316,250 148,055 145,826

Paper and paperboard converted 158,069 159,834 106,322 110,316

Plastics all sorts converted 20,000 20,000 14,494 14,498

The variance of actual production from capacity is primarily on account of the product mix.

41. Rates of exchange

Liabilities in foreign currencies have been translated into PAK Rupees at USD 1.0299 (2011: USD 1.1136), EURO

0.7794 (2011: EURO 0.8604), CHF 0.9409 (2011: CHF 1.0481), SEK 6.6979 (2011: SEK 7.6864), GBP 0.6373 (2011:

GBP 0.7225), Nil (2011: SGD 1.4486), Nil (2011: CAD 1.1368) and YEN 88.5269 (2011: YEN 86.334) equal to

Rs. 100. Assets in foreign currencies have been translated into PAK Rupees at USD 1.0320 (2011: USD 1.1161),

EURO 0.7809 (2011: EURO 0.8624) and GBP 0.6387 (2011: Nil) equal to Rs. 100.

114


42. Cash generated from / (used in) operations

Loss before tax including Discontinued operations (3,721,334) (1,475,756)

Adjustments for:

Loss recognised on the re-measurement of assets of

disposal group 15.2 4,618,688 -

Depreciation on property, plant and equipment 17.1.3 1,242,490 1,603,021

Depreciation on investment property 18 1,629 1,645

Amortisation on intangible assets 19.1 9,145 2,165

(Reversal of impairment) / impairment charged on investments 36 (361,161) 391,189

Provision for accumulating compensated absences 50,740 23,146

Provision for retirement benefits 198,404 80,280

Provision for doubtful debts 24.3 12,281 8,092

Net profit on disposal of property, plant and equipment (23,851) (167,847)

Net gain on insurance claim of assets written off due to fire 33.2 (150,084) (20,900)

Finance costs 1,505,875 1,485,310

Gain on sale of short-term investments 35 (13) (3,035)

Dividend income 35 (1,534,440) (1,037,255)

Profit before working capital changes 1,848,369 890,055

Effect on cash flow due to working capital changes

Increase in stores and spares (178,037) (118,238)

Increase in stock-in-trade (810,352) (1,071,807)

Increase in trade debts (527,619) (129,394)

Increase in loans, advances, deposits, prepayments

and other receivables (41,697) (16,396)

Increase / (decrease) in trade and other payables 104,973 (365,000)

(1,452,732) (1,700,835)

395,637 (810,780)

43. Cash and cash equivalents


Finances under mark up arrangements - secured 11 (808,942) (796,227)

Short-term finances - secured 15.1 (5,100,000) -

(5,546,562) (620,551)

44. Earnings / (loss) per share

44.1 Basic earnings per share - Continuing operations

Profit for the year from Continuing operations Rupees in thousand 1,347,336 160,726

Weighted average number of ordinary shares Numbers 84,379,504 84,379,504

Earnings per share Rupees 15.97 1.90

44.2 Basic loss per share - Discontinued operations

Loss for the year from Discontinued operations Rupees in thousand (4,058,801) (1,728,678)

Weighted average number of ordinary shares Numbers 84,379,504 84,379,504

Loss per share Rupees (48.10) (20.48)


115


44.3 Diluted earnings per share - Continuing operations

Profit for the year from Continuing operations Rupees in thousand 1,347,336 160,726 Return on preference shares / convertible stock - net of tax Rupees in thousand 324,421 325,002

1,671,757 485,728

Weighted average number of ordinary shares Numbers 84,379,504 84,379,504 Weighted average number of notionally converted preference shares / convertible stock Numbers 21,686,842 21,686,842

106,066,346 106,066,346 Diluted earnings per share Rupees 15.76 4.58

In respect of Continuing operations, diluted EPS is restricted to the basic EPS in cases where effect of the

conversion of preference shares / convertible stock is anti-dilutive.

44.4 Diluted loss per share - Discontinued operations

The diluted loss per share of Discontinued operations is the same as the basic loss per share of Discontinued

operations as there are no convertible instruments attributable to the Discontinued operations.

45. Financial risk management

45.1 Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value

interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Company’s overall

risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential

adverse effects on the Company’s financial performance. The Company uses derivative financial instruments to

hedge certain risk exposures.

Risk management is carried out by the Company’s finance department under policies approved by the Board of

Directors. The Company’s finance department evaluates and hedges financial risks. The board provides written

principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange

risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments,

and investment of excess liquidity.

(a) Market risk

(i) Foreign exchange risk

Foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument shall fluctuate

because of changes in foreign exchange rates.

The Company operates internationally and is exposed to foreign exchange risk arising from various currency

exposures, primarily with respect to the US dollar and the Euro. Foreign exchange risk arises from future

commercial transactions and recognised assets and liabilities and net investments in foreign operations.

At December 31, 2012, if the Rupee had weakened / strengthened by 10% against the US dollar with all other

variables held constant, post-tax loss for the year would have been Rs. 9.497 million higher / lower (2011:

Rs. 15.286 million higher / lower) mainly as a result of foreign exchange losses / gains on translation of US dollar-

denominated financial assets and liabilities.

At December 31, 2012, if the Rupee had weakened / strengthened by 10% against the Euro with all other variables

held constant, post-tax loss for the year would have been Rs.10.098 million (2011: Rs. 6.497 million) higher / lower,

mainly as a result of foreign exchange losses / gains on translation of Euro-denominated financial assets and

liabilities.

116

(ii) Price risk

The Company is exposed to equity securities price risk because of investments held by the Company and classified

as available for sale. The Company is not exposed to commodity price risk. To manage its price risk arising from

investments in equity securities, the Company diversifies its portfolio. Diversification of the portfolio is done in

accordance with the limits set by the Board of Directors.

The Company’s investments in equity of other entities that are publicly traded are included in all of the following

three stock exchanges, Karachi Stock Exchange, Lahore Stock Exchange and Islamabad Stock Exchange.

The table below summarises the impact of increases / decreases of the KSE-100 index on the Company’s post-tax

profit for the year and on equity. The analysis is based on the assumption that the KSE had increased / decreased

by 10% with all other variables held constant and all the Company’s equity instruments moved according to the

historical correlation with the index:

Impact on Impact on other post-tax profit components of equity


Karachi Stock Exchange - - 1,520,032 643,211

Post-tax profit for the year would increase / decrease as a result of gains / losses on equity securities classified as

at fair value through profit or loss account. Other components of equity would increase / decrease as a result of

gains / losses on equity securities classified as available for sale.

(iii) Cash flow and fair value interest rate risk

As the Company has no significant floating interest rate assets, the Company’s income is substantially independent

of changes in market interest rates.

The Company’s interest rate risk arises from short-term and long-term borrowings. These borrowings issued at

variable rates expose the Company to cash flow interest rate risk.

The Company analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking

into consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these

scenarios, the Company calculates the impact on profit and loss of a defined interest rate shift. The scenarios are

run only for liabilities that represent the major interest-bearing positions.

At December 31, 2012, if interest rates on floating rate borrowings had been 1% higher / lower with all other

variables held constant, post-tax loss for the year would have been Rs. 43.908 million (2011: Rs. 41.864 million)

higher / lower, mainly as a result of higher / lower interest expense on floating rate borrowings.

(b) Credit risk

Credit risk represents the risk of financial loss being caused if counter party fails to discharge an obligation.

Credit risk of the Company arises from cash and cash equivalents, derivative financial instruments and deposits

with banks and financial institutions, as well as credit exposures to distributors and wholesale and retail customers,

including outstanding receivables and committed transactions. The management assesses the credit quality of the

customers, taking into account their financial position, past experience and other factors. Individual risk limits are

set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is

regularly monitored and major sales to retail customers are settled in cash. For banks and financial institutions, only

independently rated parties with a strong credit rating are accepted.

The Company monitors the credit quality of its financial assets with reference to historical performance of such

assets and available external credit ratings. The carrying values of financial assets exposed to credit risk and which

are neither past due nor impaired are as under:


117


Long-term loans and deposits 97,105 110,873 Trade debts 1,496,835 1,270,175 Loans, advances, deposits, prepayments and other receivables 412,866 454,548 Balances with banks 356,575 166,008

2,363,381 2,001,604 As of December 31, 2012, trade receivables of Rs. 783.080 million (2011: Rs. 494.402 million) were past due but

not impaired. These relate to a number of independent customers for whom there is no recent history of default. The aging analysis of these trade receivables is as follows:


Up to 90 days 665,418 463,453 90 to 180 days 67,139 15,496 181 to 365 days 50,523 15,453

783,080 494,402 The management estimates the recoverability of trade receivables on the basis of financial position and past

history of its customers based on the objective evidence that it shall not receive the amount due from the particular customer. The provision is written off by the Company when it expects that it cannot recover the balance due. Any subsequent repayments in relation to amount written off, are credited directly to profit and loss account.

The credit quality of the Company’s bank balances can be assessed with reference to external credit ratings as

follows:

Rating Rating Rating (Rupees in thousand) Short-term Long-term Agency 2012 2011

Bank Al-Habib Limited A1+ AA+ PACRA 4 4

BankIslami Pakistan Limited A1 A PACRA 10 2,675

Barclays Bank PLC, Pakistan A-1 A+ S & P 254 13,773

Citibank N.A. P-1 A1 Moody’s 792 -

Deutsche Bank A.G. A-1 A+ S & P - 10,568

Dubai Islamic Bank Pakistan Limited A-1 A JCR-VIS 551 50

Faysal Bank Limited A1+ AA PACRA 229 723

Habib Bank Limited A-1+ AA+ JCR-VIS 1,381 619

HSBC Bank Middle East Limited P-1 A1 Moody’s 10,570 56

JS Bank Limited A1 A+ PACRA 50 2,729

MCB Bank Limited A1+ AA+ PACRA 954 614

Meezan Bank Limited A-1+ AA- JCR-VIS 1,289 790

National Bank of Pakistan A-1+ AAA JCR-VIS 113,189 36,710

NIB Bank Limited A1+ AA- PACRA 164,805 19,222

Samba Bank Limited A-1 AA- JCR-VIS 1,332 2,392

Silk Bank Limited A-2 A- JCR-VIS 2 2

Soneri Bank Limited A1+ AA- PACRA 38 14

Standard Chartered Bank (Pakistan) Limited A1+ AAA PACRA 60,809 74,236

The Bank of Punjab A1+ AA- PACRA 316 9

The Bank of Tokyo-Mitsubishi UFJ, Limited A-1 A+ S & P - 278

United Bank Limited A-1+ AA+ JCR-VIS - 544

356,575 166,008

118

(c) Liquidity risk

Liquidity risk represents the risk that the Company shall encounter difficulties in meeting obligations associated

with financial liabilities.

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability

of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the

Company’s businesses, the Company’s finance department maintains flexibility in funding by maintaining

availability under committed credit lines.

Management monitors the forecasts of the Company’s cash and cash equivalents (note 43) on the basis of

expected cash flow. This is generally carried out in accordance with practice and limits set by the Company. These

limits vary by location to take into account the liquidity of the market in which the entity operates. In addition,

the Company’s liquidity management policy involves projecting cash flows in each quarter and considering the

level of liquid assets necessary to meet its liabilities, monitoring balance sheet liquidity ratios against internal

and external regulatory requirements and maintaining debt financing plans.

The table below analyses the Company’s financial liabilities and net-settled derivative financial liabilities into

relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date.

The amounts disclosed in the table are the contractual undiscounted cash flows as the impact of discounting is

not significant.


At December 31, 2012 Less than 1 Between 1 Between 2 year and 2 years and 5 years Over 5 years

Long-term finances 1,000,000 - 857,130 1,142,870

Short-term finances - secured 5,100,000 - - -

Finances under mark

up arrangements - secured 808,942 - - -

Trade and other payables 1,995,182 - - -

Accrued finance cost 530,501 - - -

9,434,625 - 857,130 1,142,870



Long-term finances - secured 380,952 1,233,333 4,292,857 578,572

Finances under mark

up arrangements - secured 796,227 - - -



3,442,455 1,233,333 4,292,857 578,572

45.2 Capital risk management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as a going

concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an

optimal capital structure to reduce the cost of capital.

The Company manages its capital structure and makes adjustments to it in the light of changes in economic

conditions. In order to maintain or adjust the capital structure, the Company may adjust the amount of dividends

paid to shareholders or issue new shares.


119

Consistent with others in the industry, the Company monitors capital on the basis of the gearing ratio. During

2012, the Company’s strategy was to maintain the gearing ratio below 60% and a AA credit rating. The gearing

ratios at December 31, 2012 and 2011 were as follows:


Long-term finances 4,470,577 8,575,339 Total equity 30,856,308 29,547,993 Total capital 35,326,885 38,123,332

Gearing ratio 13% 22%

45.3 Fair value estimation

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance

sheet date. The quoted market price used for financial assets held by the Company are the current bid prices.

The financial instruments that are not traded in active market are carried at cost and are tested for impairment

according to IAS 39. The fair value of interest rate swaps is calculated as the present value of the estimated future

cash flows.

The carrying amount less impairment provision of trade receivables and payables are assumed to approximate

their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the

future contractual cash flows at the current market interest rate that is available to the Company for similar

financial instruments.

46. Date of authorisation for issue

These financial statements were authorised for issue on March 18, 2013 by the Board of Directors of the Company.

47. Non-Adjusting events after the balance sheet date

The Board of Directors have proposed a final cash dividend for the year ended December 31, 2012 of Rs. 4.50 per

share (2011: Rs. 1.50 per share), amounting to Rs. 379.708 million (2011: Rs. 126.569 million) at their meeting held

on March 18, 2013 for approval of the members at the Annual General Meeting to be held on April 30, 2013. The

board has also recommended to transfer Rs. 3,100 million (2011: Rs. 1,250 million) to accumulated profit / (loss)

from general reserves.

48. Corresponding figures

Corresponding figures have been re-arranged and re-classified, wherever necessary, for the purposes of

comparison. However, no significant re-classifications have been made except for representing the results of

Discontinued operations in accordance with IFRS 5.


Annual Report of Packages Limited 2012 | Consolidated Financial Statements 2012

Consolidated Financial Statements

For the year ended December 31, 2012


123

The Directors of Packages Limited are pleased to present the

audited consolidated financial statements of the Group for

the year ended December 31, 2012.

Significant events impacting Group results

During the current year, the Parent Company has entered into

a 50/50 Joint Venture agreement on September 17, 2012 with

“Stora Enso OYJ Group” (Stora Enso) of Finland in its 100%

wholly owned subsidiary “Bulleh Shah Packaging (Private)

Limited” [formerly “Bulleh Shah Paper Mill (Private) Limited”]

(‘BSPL’). The Joint Venture will include Paper & Paperboard

and Corrugated businesses operational at Kasur and Karachi

and will involve initial equity participation of Stora Enso of

35% by way of subscription of right shares with a commitment

to increase the shareholding to 50% at a later stage subject

to certain conditions being met. The Parent Company shall

continue to hold minimum 50% ownership and future

proportionate profits of the Joint Venture.

As a result, the Group results have been divided into

Continuing and Discontinued Operations in accordance with

the requirements of applicable financial reporting framework.

Group results

The comparison of annual audited results for the year 2012 as

against year 2011 is as follows:

Continuing Operations

During the year 2012, Continuing Operations of the Group

have achieved net sales of Rs. 14,270 million against net

sales of Rs. 13,660 million achieved during the year 2011.

Continuing Operations have generated operating profit of

Rs. 1,068 million during 2012 against Rs. 1,140 million

generated during 2011.

The Parent Company has also recognized reversal of

impairment during 2012 amounting Rs. 616 million and

Rs. 16 million on its investments held in IGI Insurance Limited

and IGI Investment Bank Limited respectively as compared to

2011 values on the basis of recovery in recoverable amount of

these investments.

Investment income has also increased by Rs. 404 million

during 2012 that is indicative of improved operational

performance of the investee companies.

Discontinued Operations

Discontinued Operations of the Parent Company classified

as Held-for-Sale have sustained an Operational Loss After

Tax of Rs. 802 million during 2012 as against Operational

Loss After Tax of Rs. 1,614 million incurred during 2011. This

improvement is primarily attributable to greater flexibility

exercised after re-build of Paper Machine (PM-6) in terms

of production of high value added products and energy

management initiatives.

The assets and liabilities of the Discontinued Operations

have been classified as ‘Held for Sale’. Upon subscription by

Stora Enso in BSPL, the Parent Company shall derecognise

its investment in BSPL owing to loss of control and recognise

an investment in jointly controlled entity, with Stora Enso as

the JV partner. Therefore, assets and corresponding liabilities

as are envisaged to be transferred to BSPL have been

measured at lower of their respective carrying values and fair

value less cost to sell and the resultant estimated one-off

non-cash charge of Rs. 3,002 million net of taxes has been

recognised in these financial statements for the year ended

December 31, 2012.

Directors’ Report on the Consolidated Financial Statements

(Rupees in million) 2012 2011 Represented

Continuing operations:

Invoiced Sales – Net 14,270 13,660

Profit from operations 1,068 1,140

Share of profit of associates 289 439

Reversal of impairment /(impairment)

charged on investments 632 (643)

Investment income 1,224 820

Profit after tax 2,076 (345)

Discontinued operations:

Operating Loss after tax (1,013) (1,681)

Loss on re-measurement of disposal

group after tax (3,002) -

124

Towfiq Habib Chinoy Syed Hyder Ali

Chairman Chief Executive & Managing Director

Karachi, March 18, 2013 Karachi, March 18, 2013

During the current year, the Company has also decided to

close down its Paper and Paperboard operations in Lahore,

accordingly, these operations have also been recognised as

a Discontinued Operation and reported in accordance with

applicable financial reporting framework. These operations

incurred Net Loss of Rs. 211 million during the year 2012

including closure costs of Rs. 91 million incurred in respect

of Voluntary Separation Scheme (VSS) offered to outgoing

employees of these operations.

A brief review of the operational performance of the Group

subsidiaries is as follows:

DIC PAKISTAN LIMITED

DIC Pakistan Limited is a non-listed public limited subsidiary

of Packages Limited. It is principally engaged in manufacturing,

processing and selling of industrial inks. The Company has

achieved sales of Rs. 2,188 million during the year 2012 as

compared to Rs. 1,955 million of 2011 with a sales growth

of 12%. The Company has generated profit before tax of Rs.

130 million during the year 2012 as against Rs. 170 million of

2011. This decline in profit is primarily attributable to higher

raw material cost and other overheads. The Company is

focusing on improvement of operating results through tighter

operating cost control, effective price rationalization and

better working capital management.

PACKAGES LANKA (PRIVATE) LIMITED

Packages Lanka (Private) Limited is a Sri Lanka based

subsidiary of Packages Limited. It is primarily engaged in

production of flexible packaging solutions. The Company has

achieved turnover of SLR 1,423 million during the year 2012

as compared to SLR 1,399 million of 2011. The Company has

generated profit before tax of SLR 94 million in the year 2012

as compared to SLR 112 million of 2011. This decline in profit

is mainly attributable to higher overheads and financial cost.

To improve it’s market share in the increasingly competitive

flexible packaging market of the region, the Company has

invested SLR. 251 million into new printing line which has

become fully operational during the year. With installation

of new printing line, the management is confident of

improving its operating results targeted through sales growth,

operational efficiencies and cost control.


125

We have audited the annexed consolidated financial

statements comprising consolidated balance sheet of

Packages Limited (the holding company) and its subsidiary

companies (the Group) as at December 31, 2012 and the

related consolidated profit and loss account, consolidated

statement of comprehensive income, consolidated cash flow

statement and consolidated statement of changes in equity

together with the notes forming part thereof, for the year then

ended. We have also expressed separate opinions on the

financial statements of Packages Limited and its subsidiary

companies except for Packages Lanka (Private) Limited which

was audited by other firm of auditors, whose report has been

furnished to us and our opinion in so far as it relates to the

amounts included for such company, is based solely on the

report of such other auditors. These financial statements are

the responsibility of the holding company’s management.

Our responsibility is to express an opinion on these financial

statements based on our audit.

Our audit was conducted in accordance with the International

Standards on Auditing and accordingly included such tests of

accounting records and such other auditing procedures as we

considered necessary in the circumstances.

As stated in note 2.2.1 annexed to the financial statements

the Group has changed its accounting policies on initial

application of standards, amendments or interpretations to

existing standards.

The Group’s Share of income from associates of Rs. 288.552

million and taxation relating to associates of Rs. 95.628

million shown in the consolidated profit and loss account and

note 20 to the consolidated financial statements includes a

profit of Rs. 17.018 million and taxation of Rs. 2.032 million,

representing Group’s share in two of its associates, and is

based on unaudited financial statements of the associates.

Except for the effect, if any, of the matter referred to in the

preceding paragraph, in our opinion the consolidated

financial statements present fairly the financial position of

Packages Limited and its subsidiary companies (the Group)

as at December 31, 2012 and the results of their operations for

the year then ended.

A.F.FERGUSON & CO.




Auditors’ Report to the Members

126

Consolidated Balance Sheetas at December 31, 2012


EQUITY AND LIABILITIES

CAPITAL AND RESERVES

Authorised capital

150,000,000 (2011: 150,000,000) ordinary shares of Rs. 10 each 1,500,000 1,500,000

22,000,000 (2011: 22,000,000) 10 % non-voting cumulative

preference shares / convertible stock of Rs. 190 each 4,180,000 4,180,000

Issued, subscribed and paid up capital

84,379,504 (2011: 84,379,504) ordinary shares of Rs. 10 each 5 843,795 843,795

Reserves 6 31,091,857 28,184,472

Preference shares / convertible stock reserve 7 1,605,875 1,605,875

Accumulated loss (2,157,090) (1,283,904)

31,384,437 29,350,238

NON-CONTROLLING INTEREST 252,201 225,047

31,636,638 29,575,285


Long-term finances 7 4,687,220 8,575,339

Deferred income tax liabilities 8 510,808 2,632,844


Deferred liabilities 10 141,887 179,971

5,426,427 11,400,512

CURRENT LIABILITIES

Current portion of long-term finances - secured 7 1,000,000 380,952

Finances under mark up arrangements - secured 11 1,251,463 1,170,227

Derivative financial instruments 12 164,559 -

Trade and other payables 13 2,162,205 1,831,937

Accrued finance cost 14 543,187 542,031

Provision for taxation - 13,832

5,121,414 3,938,979

Liabilities of disposal group classified as held for sale 15 5,669,197 -

CONTINGENCIES AND COMMITMENTS 16 - -

47,853,676 44,914,776


127


ASSETS

NON-CURRENT ASSETS

Property, plant and equipment 17 4,020,733 18,685,332

Investment property 18 2,108 5,261

Intangible assets 19 50,053 49,834

Investments in associates 20 3,612,013 3,028,921

Other long-term investments 21 17,287,826 13,141,477

Deferred income tax 22 13,653 -

Long-term loans and deposits 23 97,747 111,424


25,123,142 35,111,548

CURRENT ASSETS

Stores and spares 24 507,521 1,013,766

Stock-in-trade 25 2,484,123 5,029,241

Trade debts 26 2,667,931 2,109,537

Loans, advances, deposits, prepayments and

other receivables 27 446,758 466,564

Income tax receivable 28 1,664,333 983,800


8,187,243 9,803,228

Assets of disposal group classified as held for sale 15 14,543,291 -

47,853,676 44,914,776



128



Local sales 16,452,568 16,169,012 Export sales 165,167 107,070

16,617,735 16,276,082

Less: Sales tax and excise duty 2,331,665 2,598,300 Commission 16,456 17,537

2,348,121 2,615,837

Net sales 14,269,614 13,660,245 Cost of sales 30 (12,471,618) (11,888,452) Gross profit 1,797,996 1,771,793

Administrative expenses 31 (460,279) (385,134)Distribution and marketing costs 32 (491,432) (439,936)Projects expenditure 33 - (55,768)Other operating expenses 34 (47,870) (25,722)Other operating income 35 269,148 274,632 Profit from operations 1,067,563 1,139,865

Finance costs 36 (589,102) (543,610)Investment income 37 1,223,983 819,744 Reversal of impairment / (impairment) on investments in associates 38 631,848 (642,903)Share of profit of associates 20 288,552 439,243 Profit before tax 2,622,844 1,212,339

Taxation Group 39 (451,223) (1,413,086) Associates (95,628) (144,355)

(546,851) (1,557,441)

Profit / (loss) for the year from Continuing operations 2,075,993 (345,102)

Loss for the year from Discontinued operations - attributable to equity holders of the Parent Company 15.2 (4,014,886) (1,681,075) Loss for the year (1,938,893) (2,026,177)

Attributable to:

Equity holders of the Parent Company (1,996,617) (2,087,158) Non-controlling interest 57,724 60,981

(1,938,893) (2,026,177)Combined earnings per share from Continuing and Discontinued operations

attributable to equity holders of the Parent Company during the year

Combined basic earnings / (loss) per share

From Continuing operations Rupees 46 23.92 (4.81) From Discontinued operations Rupees 46 (47.58) (19.93)

From Loss for the year Rupees (23.66) (24.74) Combined diluted earnings / (loss) per share

From Continuing operations Rupees 46 22.09 (4.81) From Discontinued operations Rupees 46 (47.58) (19.93)

From Loss for the year Rupees (25.49) (24.74) The annexed notes 1 to 52 form an integral part of these financial statements.

Consolidated Profit and Loss Accountfor the year ended December 31, 2012

Towfiq Habib Chinoy Syed Hyder Ali Syed Aslam Mehdi Chairman Chief Executive & managing Director Director


129


Loss for the year (1,938,893) (2,026,177)


Exchange differences on translating

foreign subsidiary (8,189) 3,796

Other reserves relating to

associates - net of tax 17,511 (17,511)


for sale financial assets 4,146,349 4,460,293

Other comprehensive income for the year 4,155,671 4,446,578


Attributable to:

Equity holders of the Parent Company 2,160,768 2,358,625

Non-controlling interest 56,010 61,776


Total comprehensive income attributable to

equity holders of the Parent Company arising from:

Continuing operations 6,175,654 4,039,700

Discontinued operations (4,014,886) (1,681,075)

2,160,768 2,358,625


Consolidated Statement of Comprehensive Incomefor the year ended December 31, 2012


130

Non- controlling Total Attributable to equity holders of the parent interest equity

Exchange difference Preference Other on translation shares / reserves Accumulated Share Share of foreign Fair value General convertible relating to profit / (Rupees in thousand) capital premium subsidiary reserve reserve stock reserve associates (loss) Total

Balance as on December 31, 2010 843,795 2,876,893 19,915 4,681,548 16,660,333 1,605,875 - 577,487 27,265,846 213,718 27,479,564


Transferred to consolidated profit and loss account - - - - (500,000) - - 500,000 - - -



Rs. 3.25 per share - - - - - - - (274,233) (274,233) - (274,233)

Dividends relating to 2010 paid to non-

controlling interests - - - - - - - - - (50,447) (50,447)

Total contributions by and distributions to equity holders of

the Parent Company, recognised directly in equity - - - - - - - (274,233) (274,233) (50,447) (324,680)

(Loss) / profit for the year - - - - - - - (2,087,158) (2,087,158) 60,981 (2,026,177)

Other comprehensive income - - 3,001 4,460,293 - - (17,511) - 4,445,783 795 4,446,578

Total comprehensive income for the year - - 3,001 4,460,293 - - (17,511) (2,087,158) 2,358,625 61,776 2,420,401

Balance as on December 31, 2011 843,795 2,876,893 22,916 9,141,841 16,160,333 1,605,875 (17,511) (1,283,904) 29,350,238 225,047 29,575,285


Transferred to consolidated profit and loss account - - - - (1,250,000) - - 1,250,000 - - -



Rs. 1.50 per share - - - - - - - (126,569) (126,569) - (126,569)

Dividends relating to 2011 paid to non-

controlling interests - - - - - - - - - (28,856) (28,856)

Total contributions by and distributions to equity holders of

the Parent Company, recognised directly in equity - - - - - - - (126,569) (126,569) (28,856) (155,425)

(Loss) / profit for the year - - - - - - (1,996,617) (1,996,617) 57,724 (1,938,893)


- - (6,475) 4,146,349 - - 17,511 - 4,157,385 (1,714) 4,155,671

Total comprehensive income for the year - - (6,475) 4,146,349 - - 17,511 (1,996,617) 2,160,768 56,010 2,216,778

Balance as on December 31, 2012 843,795 2,876,893 16,441 13,288,190 14,910,333 1,605,875 - (2,157,090) 31,384,437 252,201 31,636,638


Consolidated Statement of Changes in Equityfor the year ended December 31, 2012



131


Cash flows from operating activities

Cash generated from / (used in) operations 44 642,790 (480,422)

Finance cost paid (1,565,450) (1,478,489)

Taxes paid (845,303) (541,801)

Payments for accumulating compensated absences and staff gratuity (30,041) (10,562)

Retirement benefits paid (73,960) (62,831)

Net cash used in operating activities (1,871,964) (2,574,105)

Cash flows from investing activities

Fixed capital expenditure (1,514,505) (1,271,337)

Investments - net 13 3,035

Net decrease in long-term loans and deposits 13,677 28,519

Proceeds from disposal of property, plant and equipment 115,147 190,167

Proceeds from assets written off due to fire 233,463 384,563

Dividends received 1,483,161 952,548

Net cash generated from investing activities 330,956 287,495

Cash flows from financing activities

Repayment of long-term finances - secured (5,485,714) (14,286)

Proceeds from long-term finances - secured 2,216,643 1,000,000

Dividends paid to equity holders of parent (126,044) (273,574)

Dividends paid to non-controlling interest (28,856) (50,447)

Net cash (used in) / generated from financing activities (3,423,971) 661,693

Net decrease in cash and cash equivalents (4,964,979) (1,624,917)

Cash and cash equivalents at the beginning of the year (969,907) 655,010

Cash and cash equivalents at the end of the year 45 (5,934,886) (969,907)


Consolidated Cash Flow Statement for the year ended December 31, 2012


132

Notes to and Forming Part of the Consolidated Financial Statementsfor the year ended December 31, 2012

1. Legal status and nature of business

Packages Limited (the Parent Company) and its subsidiaries, DIC Pakistan Limited, Packages Lanka (Private)

Limited, Packages Construction (Private) Limited and Bulleh Shah Packaging (Private) Limited [formerly Bulleh

Shah Paper Mill (Private) Limited] (together, ‘The Group’) are engaged in the following businesses:

Packaging: Representing manufacture and sale of packaging materials and tissue products.

Paper and paperboard: Representing manufacture and sale of paper and paperboard of all kinds.

Inks: Representing manufacture and sale of finished and semi finished inks.

Construction: Representing all types of construction activities and development of real estate.

The Parent Company has entered into 50/50 Joint Venture Agreement (the “JV Agreement”) on September 17,

2012 with ‘Stora Enso OYJ Group’ (‘Stora Enso’) of Finland in its 100% wholly owned subsidiary Bulleh Shah

Packaging (Private) Limited [formerly Bulleh Shah Paper Mill (Private) Limited] (‘BSPL’). The Joint Venture will

include Paper & Paperboard and Corrugated business operations at Kasur and Karachi and will involve initial

equity participation of Stora Enso of 35% by way of subscription of right shares with a commitment to increase the

shareholding to 50% at a later stage subject to certain conditions being met. The agreed value for 100% of the Joint

Venture Company is USD 107.5 million on a cash and debt free basis with additional equity to be subscribed by

Stora Enso through right shares in the Joint Venture Company of USD 17.5 million, based on the financial results

of second half of 2012 and first half of 2013. The Parent Company shall continue to hold minimum 50% ownership

and future profits of the Joint Venture.

Moreover, the Parent Company also decided to close down its Paper and Paperboard operations in Lahore, in

addition to the above mentioned transaction, during the year.

As a result, the Group’s operations have been divided into Continuing and Discontinued operations in accordance

with the requirements of International Financial Reporting Standard (IFRS) 5, ‘Non-current assets held for sale

and Discontinued operations’. Paper and Paperboard and Corrugated businesses of the Parent Company have

been classified as Discontinued operations because these will form part of the Joint Venture.

Upon subscription by Stora Enso in BSPL, the Parent Company shall derecognise its net assets of BSPL owing

to loss of control and recognise an investment in jointly controlled entity, with Stora Enso as the Joint Venture

partner. In view of the above, assets and corresponding liabilities as are envisaged to be transferred to BSPL are

classified as held for sale under IFRS 5 as reflected in note 15 of these financial statements. These assets and

liabilities have been measured at lower of their respective carrying values and fair values less cost to sell and the

resultant estimated charge has been recognised in the consolidated profit and loss account.

The Paper and Paperboard operations of the Parent Company in Lahore have also been classified as a Discontinued

operation as reflected in note 15 of these financial statements, in accordance with the requirements of IFRS 5. This

has not been classified as held for sale as it does not meet the criteria for being classified as held for sale under

IFRS 5.

The figures of the prior period have been represented in accordance with the requirements of IFRS 5, wherever

relevant.

2. Basis of preparation

2.1 These financial statements have been prepared in accordance with the requirements of the Companies Ordinance,

1984 (the Ordinance) and the approved accounting standards as applicable in Pakistan. Approved accounting

standards comprise of such International Financial Reporting Standards (IFRS) issued by the International

Accounting Standards Board and Islamic Financial Accounting Standards (IFAS) issued by the Institute of

Chartered Accountants of Pakistan as are notified under the Companies Ordinance, 1984, provisions of and

directives issued under the Companies Ordinance, 1984. Wherever the requirements of the Companies Ordinance,

1984 or directives issued by Securities and Exchange Commission of Pakistan differ with the requirements of IFRS

or IFAS, the requirements of the Companies Ordinance, 1984 or the requirements of the said directives prevail.


133

Notes to and Forming Part of the Consolidated Financial Statementsfor the year ended December 31, 2012

2.2 Initial application of standards, amendments or an interpretation to existing standards

The following amendments to existing standards have been published that are applicable to the Group’s financial

statements covering annual periods, beginning on or after the following dates:

2.2.1 Amendments to published standards effective in current year

New and amended standards, and interpretations mandatory for the first time for the financial year beginning

January 1, 2012:

IFRS 1 (Amendment), ‘First time adoption’, on fixed dates and hyperinflation. These are applicable on accounting

periods beginning on or after July 1, 2011. These amendments include two changes to IFRS 1, ‘First time adoption’

of IFRS. The first replaces references to a fixed date of January 1, 2004 with ‘the date of transition to IFRSs’, thus

eliminating the need for companies adopting IFRSs for the first time to restate derecognition transactions that

occurred before the date of transition to IFRSs. The second amendment provides guidance on how an entity

should resume presenting financial statements in accordance with IFRSs after a period when the entity was

unable to comply with IFRSs because its functional currency was subject to severe hyperinflation. The application

of this amendment has no material impact on the Group’s financial statements.

IFRS 7 (Amendments), ‘Financial instruments: Disclosures’ on transfers of assets. These are applicable on

accounting periods beginning on or after July 1, 2011. These amendments arise from the IASB’s review of off-

balance sheet activities. The amendments shall promote transparency in the reporting of transfer transactions

and improve users’ understanding of the risk exposures relating to transfers of financial assets and the effect of

those risks on an entity’s financial position, particularly those involving securitisation of financial assets. Earlier

application is permitted. The application of these amendments have no material impact on the Group’s financial

statements.

IAS 12 (Amendments), ‘Income taxes’, on deferred tax. These are applicable on accounting periods beginning on

or after January 1, 2012. IAS 12, ‘Income taxes’, currently requires an entity to measure the deferred tax relating to

an asset depending on whether the entity expects to recover the carrying amount of the asset through use or sale.

It can be difficult and subjective to assess whether recovery shall be through use or through sale when the asset

is measured using the fair value model in IAS 40, ‘Investment property’. This amendment therefore introduces an

exception to the existing principle for the measurement of deferred tax assets or liabilities arising on investment

property measured at fair value. As a result of the amendments, SIC 21, ‘Income taxes - recovery of revalued

non-depreciable assets’, shall no longer apply to investment properties carried at fair value. The amendments

also incorporate into IAS 12 the remaining guidance previously contained in SIC 21, which is withdrawn. The

application of these amendments have no material impact on the Group’s financial statements.

2.2.2 Standards, amendments and interpretations to existing standards that are not yet effective and have not been early adopted by the Group

The following amendments and interpretations to existing standards have been published and are mandatory for

the Group’s accounting periods beginning on or after January 1, 2013 or later periods, but the Group has not early

adopted them:

Annual improvements to IFRSs 2011 are applicable on accounting periods beginning on or after January 1,

2013. This set of amendments includes changes to five standards: IFRS 1, ‘First time adoption’, IAS 1, ‘Financial

statement presentation’, IAS 16, ‘Property plant and equipment’, IAS 32, ‘Financial instruments; Presentation’ and

IAS 34, ‘Interim financial reporting’. The application of these amendments have no material impact on the Group’s

financial statements.

IFRS 1 (Amendments), ‘First time adoption’, on Government loans is applicable on accounting periods beginning

on or after January 1, 2013. The amendment addresses how a first-time adopter would account for a Government

loan with a below-market rate of interest when transitioning to IFRS. It also adds an exception to the retrospective

application of IFRS, which provides the same relief to first-time adopters granted to existing preparers of IFRS

financial statements when the requirement was incorporated into IAS 20 in 2008. The Group shall apply these

amendments from January 1, 2013 and does not expect to have a material impact on its financial statements.

134

IFRS 7 (Amendments), ‘Financial instruments: Disclosures’, on offsetting financial assets and financial liabilities is

applicable on accounting periods beginning on or after January 1, 2013. The amendment includes new disclosures

to facilitate comparison between those entities that prepare IFRS financial statements to those that prepare

financial statements in accordance with US GAAP. The Group shall apply these amendments from January 1, 2013

and does not expect to have a material impact on its financial statements.

IFRS 9 - ‘Financial instruments’ - classification and measurement. This is applicable on accounting periods

beginning on or after January 1, 2015. This standard on classification and measurement of financial assets and

financial liabilities will replace IAS 39, ‘Financial instruments: Recognition and measurement’. IFRS 9 has two

measurement categories: amortised cost and fair value. All equity instruments are measured at fair value. A debt

instrument is measured at amortised cost only if the entity is holding it to collect contractual cash flows and the

cash flows represent principal and interest. For liabilities, the standard retains most of the IAS 39 requirements.

These include amortised-cost accounting for most financial liabilities, with bifurcation of embedded derivatives.

The main change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair

value change due to an entity’s own credit risk is recorded in other comprehensive income rather than the income

statement, unless this creates an accounting mismatch. This change will mainly affect financial institutions. The

Group shall apply this standard from January 1, 2015 and does not expect to have a material impact on its financial

statements.

IFRS 10 - ‘Consolidated financial statements’ is applicable on accounting period beginning on or after

January 1, 2013. IFRS 10 builds on existing principles by identifying the concept of control as the determining

factor in whether an entity should be included within the consolidated financial statements. The standard

provides additional guidance to assist in determining control where this is difficult to assess. This new standard

might impact the entities that a group consolidates as its subsidiaries. The Group shall apply this standard from

January 1, 2013 and does not expect to have a material impact on its financial statements.

IFRS 11 - ‘Joint arrangements’ is applicable on accounting periods beginning on or after January 1, 2013. IFRS

11 is a more realistic reflection of joint arrangements by focusing on the rights and obligations of the parties to

the arrangement rather than its legal form. There are two types of joint arrangement: joint operations and joint

ventures. Joint operations arise where a joint operator has rights to the assets and obligations relating to the

arrangement and therefore accounts for its share of assets, liabilities, revenue and expenses. Joint ventures arise

where the joint operator has rights to the net assets of the arrangement and therefore equity accounts for its

interest. Proportional consolidation of joint ventures is no longer allowed. The Group shall apply this standard

from January 1, 2013 and does not expect to have a material impact on its financial statements.

IFRS 12 - ‘Disclosures of interests in other entities’. This is applicable on accounting periods beginning on or after

January 1, 2013. This standard includes the disclosure requirements for all forms of interests in other entities,

including joint arrangements, associates, special purpose vehicles and other off-balance sheet vehicles. The

Group shall apply this standard from January 1, 2013 and does not expect to have a material impact on its financial

statements.

IFRS 13 - ‘Fair value measurement’. This is applicable on accounting periods beginning on or after January 1, 2013.

This standard aims to improve consistency and reduce complexity by providing a precise definition of fair value

and a single source of fair value measurement and disclosure requirements for use across IFRSs. The requirements,

which are largely aligned between IFRSs and US GAAP, do not extend the use of fair value accounting but provide

guidance on how it should be applied where its use is already required or permitted by other standards within

IFRSs or US GAAP. The Group shall apply this standard from January 1, 2013 and does not expect to have a material

impact on its financial statements.

IAS 1 (Amendments), ‘Financial statement presentation’ regarding other comprehensive income. This is applicable

on accounting periods beginning on or after July 1, 2012. The main change resulting from these amendments is a

requirement for entities to group items presented in other comprehensive income (OCI) on the basis of whether

they are potentially recycled to profit or loss (re-classification adjustments). The amendments do not address

which items are presented in OCI. The Group shall apply these amendments from January 1, 2013 and does not

expect to have a material impact on its financial statements.


135

IAS 19 (Amendments), ‘Employee benefits’ is applicable on accounting periods beginning on or after January 1,

2013. These amendments shall eliminate the corridor approach and calculate finance costs on a net funding basis.

The Group shall apply these amendments from January 1, 2013 and its impact on retained earnings shall be Rs.

259.306 million due to recognition of current unrealised actuarial losses on its defined benefit plans.

IAS 27 (Revised 2011), ‘Separate financial statements’ is applicable on accounting periods beginning on or after

January 1, 2013. It includes the provisions on separate financial statements that are left after the control provisions

of IAS 27 which have been included in the new IFRS 10. The Group shall apply the revised standard from January

1, 2013 and does not expect to have a material impact on its financial statements.

IAS 28 (Revised 2011), ‘Associates and joint ventures’ is applicable on accounting periods beginning on or after

January 1, 2013. It includes the requirements for associates and joint ventures that have to be equity accounted

following the issue of IFRS 11. The Group shall apply the revised standard from January 1, 2013 and does not

expect to have a material impact on its financial statements.

IAS 32 (Amendments), ‘Financial instruments: Presentation’, on offsetting financial assets and financial liabilities

is applicable on accounting periods beginning on or after January 1, 2014. These amendments update the

application guidance in IAS 32, ‘Financial instruments: Presentation’, to clarify some of the requirements for

offsetting financial assets and financial liabilities on the balance sheet. The Group shall apply these amendments

from January 1, 2014 and does not expect to have a material impact on its financial statements.

3. Basis of measurement

3.1 These financial statements have been prepared under the historical cost convention except for revaluation of

certain financial instruments at fair value and recognition of certain employee retirement benefits at present

value.

3.2 The Group’s significant accounting policies are stated in note 4. Not all of these significant policies require the

management to make difficult, subjective or complex judgments or estimates. The following is intended to provide

an understanding of the policies the management considers critical because of their complexity, judgment and

estimation involved in their application and their impact on these financial statements. Judgments and estimates

are continually evaluated and are based on historical experience, including expectations of future events that are

believed to be reasonable under the circumstances. These judgments involve assumptions or estimates in respect

of future events and the actual results may differ from these estimates. The areas involving a higher degree of

judgments or complexity or areas where assumptions and estimates are significant to the financial statements are

as follows:

i) Estimated useful lives of property, plant and equipment - note 4.3

ii) Provision for employees’ retirement benefits - note 4.9 & 9

iii) Loss recognised on the re-measurement of assets of disposal group - note 15.2

iv) Recoverable amount of certain investments in equity instruments - note 20.1.2

v) Provision for taxation - note 39

4. Significant accounting policies

The significant accounting policies adopted in the preparation of these financial statements are set out below.

These policies have been consistently applied to all the years presented, unless otherwise stated.

4.1 Principles of consolidation

a) Subsidiaries

Subsidiaries are all entities over which the holding company has the power to govern the financial and operating

policies generally accompanying a shareholding of more than one half of the voting rights. The consolidated

financial statements include Packages Limited and all companies in which it directly or indirectly controls,

beneficially owns or holds more than 50% of the voting securities or otherwise has power to elect and appoint

more than 50% of its directors. The existence and effect of potential voting rights that are currently exercisable

or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are fully

consolidated from the date on which control is transferred to the Group. They are de-consolidated from the date

that control ceases.

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The purchase method of accounting is used to account for the acquisition of subsidiaries by the Group. The cost of

an acquisition is measured as the fair value of the assets given, equity instruments issued and liabilities incurred

or assumed at the date of exchange, plus costs directly attributable to the acquisition. Identifiable assets acquired

and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair

values at the acquisition date, irrespective of the extent of any non-controlling interest.

On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree either

at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired

is recorded as goodwill. If the cost of acquisition is less than the fair value of the net assets of the subsidiary

acquired, the difference is recognised directly in the consolidated profit and loss account.

Inter company transactions, balances and unrealized gains on transactions between Group companies are

eliminated. Unrealized losses are also eliminated but considered an impairment indicator of the asset transferred.

Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies

adopted by the Group.

b) Non-Controlling Interests

The Group treats transactions with non-controlling interests as transactions with equity owners of the Group. For

purchases from non-controlling interests, the difference between any consideration paid and the relevant share

acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals to

non-controlling interests are also recorded in equity.

When the Group ceases to have control or significant influence, any retained interest in the entity is re-measured

to its fair value, with the change in carrying amount recognised in consolidated profit and loss account. The fair

value is the initial carrying amount for the purposes of subsequently accounting for the retained interest as an

associate, joint venture or financial asset. In addition, any amounts previously recognised in other comprehensive

income in respect of that entity are accounted for as if the Group had directly disposed off the related assets or

liabilities. This may mean that amounts previously recognised in other comprehensive income are reclassified to

consolidated profit and loss account.

If the ownership interest in an associate is reduced but significant influence is retained, only a proportionate

share of the amounts previously recognised in other comprehensive income are reclassified to consolidated profit

and loss account where appropriate.

c) Associates

Associates are all entities over which the Group has significant influence but not control, generally accompanying

a shareholding of between 20% and 50% of the voting rights. Investments in associates are accounted for using the

equity method of accounting and are initially recognised at cost. The Group’s investment in associates includes

goodwill identified on acquisition, net of any accumulated impairment loss.

The Group’s share of its associates’ post-acquisition profits or losses is recognised in the consolidated profit and

loss account, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative

post-acquisition movements are adjusted against the carrying amount of the investment. When the Group’s share

of losses in an associate equals or exceeds its interest in the associate, including any other unsecured receivables,

the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the

associate.

Unrealised gains on transactions between the Group and its associates are eliminated to the extent of the Group’s

interest in the associates. Unrealised losses are also eliminated unless the transaction provides evidence of an

impairment of the asset transferred. Accounting policies of associates have been changed where necessary to

ensure consistency with the policies adopted by the Group.

Dilution gains and losses arising in investments in associates are recognised in the consolidated profit and loss

account.


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4.2 Taxation

Current

Provision of current tax is based on the taxable income for the year determined in accordance with the prevailing

law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to

apply to the profit for the year, if enacted. The charge for current tax also includes adjustments, where considered

necessary, to provision for tax made in previous years arising from assessments framed during the year for such

years.

Deferred

Deferred tax is accounted for using the balance sheet liability method in respect of all temporary differences

arising from differences between the carrying amount of assets and liabilities in the financial statements and

the corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generally

recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is

probable that taxable profits shall be available against which the deductible temporary differences, unused tax

losses and tax credits can be utilised.

Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based

on tax rates that have been enacted or substantively enacted by the balance sheet date. Deferred tax is charged or

credited in the consolidated profit and loss account, except in the case of items credited or charged to equity in

which case it is included in equity.

Provision is not made for taxation which would become payable if retained profits of subsidiaries were distributed

to the Parent Company, as it is not the intention to distribute more than the dividends, the tax on which is

included in the financial statements.

4.3 Property, plant and equipment

Property, plant and equipment, except freehold land, are stated at cost less accumulated depreciation and any

identified impairment loss. Freehold land is stated at cost less any identified impairment loss. Property, plant and

equipment acquired under finance leases are capitalized at the lease’s commencement at the lower of the present

value of minimum lease payments under the lease arrangements and the fair value of the leased property. Cost

in relation to certain plant and machinery signifies historical cost, gains and losses transferred from equity on

qualifying cash flow hedges as referred to in note 4.19 and borrowing costs as referred to in note 4.22.

Depreciation on all property, plant and equipment is charged to profit on the straight-line method so as to write

off the depreciable amount of an asset over its estimated useful life at the following annual rates:

Buildings 2.5% to 20%

Plant and machinery 6.25% to 33.33%

Other equipments 10% to 33.33%

Furniture and fixtures 10% to 20%

Vehicles 20%


depreciation is significant. The Group’s estimate of the residual value of its property, plant and equipment as at

December 31, 2012 has not required any adjustment as its impact is considered insignificant.

Depreciation on additions to property, plant and equipment is charged from the month in which an asset is

acquired or capitalised while no depreciation is charged for the month in which the asset is disposed off.

The Group assesses at each balance sheet date whether there is any indication that property, plant and equipment

may be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they

are recorded in excess of their recoverable amount. Where carrying amounts exceed the respective recoverable

amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognised in

consolidated profit and loss account. The recoverable amount is the higher of an asset’s fair value less costs to

sell and value in use. Where an impairment loss is recognised, the depreciation charge is adjusted in the future

periods to allocate the asset’s revised carrying amount over its estimated useful life.

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Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate,

only when it is probable that future economic benefits associated with the item shall flow to the Group and the

cost of the item can be measured reliably. All other repair and maintenance costs are charged to consolidated

profit and loss account during the period in which they are incurred.



Capital work-in-progress is stated at cost less any identified impairment loss.

4.4 Investment property

Property not held for own use or for sale in the ordinary course of business is classified as investment property.

The investment property of the Group comprises land and buildings and is valued using the cost method i.e. at

cost less any accumulated depreciation and any identified impairment loss.

Depreciation on buildings is charged to profit on the straight line method so as to write off the depreciable

amount of building over its estimated useful life at the rates ranging from 3.33% to 6.67% per annum. Depreciation

on additions to investment property is charged from the month in which a property is acquired or capitalised

while no depreciation is charged for the month in which the property is disposed off.


depreciation is significant. The Group’s estimate of the residual value of its investment property as at December

31, 2012 has not required any adjustment as its impact is considered insignificant.

The Group assesses at each balance sheet date whether there is any indication that investment property may

be impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they


amount, assets are written down to their recoverable amount and the resulting impairment loss is recognised in


sell and value in use. Where an impairment loss is recognised, the depreciation charge is adjusted in the future




4.5 Intangible assets

Expenditure incurred to acquire computer software and SAP Enterprise Resource Planning (ERP) System are

capitalised as intangible assets and stated at cost less accumulated amortisation and any identified impairment

loss. Intangible assets are amortised using the straight line method over a period of three to five years.

Development costs are recognised as intangible assets when the following criteria are met:

- it is technically feasible to complete the intangible asset so that it will be available for use;

- management intends to complete the intangible asset and use or sell it;

- there is an ability to use or sell the intangible asset;

- it can be demonstrated how the intangible asset will generate probable future economic benefits;

- adequate technical, financial and other resources to complete the development and to use or sell the intangible

asset are available; and

- the expenditure attributable to the intangible asset during its development can be reliably measured.

Other development expenditures that do not meet these criteria are recognised as an expense as incurred.

Development costs previously recognised as an expense are not recognised as an asset in a subsequent period.

Amortisation on additions to intangible assets is charged from the month in which an asset is acquired or

capitalised while no amortisation is charged for the month in which the asset is disposed off.


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The Group assesses at each balance sheet date whether there is any indication that intangible assets may be

impaired. If such indication exists, the carrying amounts of such assets are reviewed to assess whether they


amount, assets are written down to their recoverable amounts and the resulting impairment loss is recognised in


sell and value in use. Where an impairment loss is recognised, the amortisation charge is adjusted in the future


4.6 Leases

(1) The Group is the lessee:

Finance leases

Leases where the Group has substantially all the risks and rewards of ownership are classified as finance leases.

Asset subject to finance lease are initially recognised at the lower of present value of minimum lease payments

under the lease agreements and the fair value of the assets. Subsequently these assets are stated at cost less

accumulated depreciation and any identified impairment loss.

The related rental obligations, net of finance charges, are included in liabilities against assets subject to finance

lease. The liabilities are classified as current and long-term depending upon the timing of the payment.

Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the

balance outstanding. The interest element of the rental is charged to profit over the lease term.

Assets acquired under a finance lease are depreciated over the useful life of the asset on a straight-line method

at the rates given in note 4.3. Depreciation of leased assets is charged to profit and loss account.

Depreciation on additions to leased assets is charged from the month in which an asset is acquired while no

depreciation is charged for the month in which the asset is disposed off.

Operating leases

Leases including Ijarah financing where a significant portion of the risks and rewards of ownership are retained

by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives

received from the lessor) are charged to profit on a straight-line basis over the lease / Ijarah term unless another

systematic basis is representative of the time pattern of the Group’s benefit.

(2) The Group is the lessor:

Operating leases

Assets leased out under operating leases are included in investment property as referred to in note 18. They

are depreciated over their expected useful lives on a basis consistent with similar owned property, plant and

equipment. Rental income (net of any incentives given to lessees) is recognised on a straight-line basis over the

lease term.

4.7 Goodwill

Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net

identifiable assets of the acquired subsidiary / associate at the date of acquisition. Goodwill on acquisitions of

subsidiaries is included in ‘intangible assets’. Goodwill on acquisitions of associates is included in ‘investments

in associates’ and is tested for impairment as part of the overall balance. Separately recognised goodwill is tested

annually for impairment and carried at cost less accumulated impairment losses. Impairment losses on goodwill

are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to

the entity sold.

4.8 Investments

Investments intended to be held for less than twelve months from the balance sheet date or to be sold to raise

operating capital, are included in current assets, all other investments are classified as non-current. Management

determines the appropriate classification of its investments at the time of the purchase and re-evaluates such

designation on a regular basis.

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Investments in equity instruments of associates

Associates are all entities over which the Group has significant influence but not control. Investments in equity

instruments of associates are accounted for using the equity method of accounting and are initially recognised

at cost. The Group’s investment in associates includes goodwill (net of any accumulated impairment loss)

identified on acquisition. The Group’s share of its associates’ post-acquisition profits or losses is recognised in

the consolidated profit and loss account, and its share of post-acquisition movements in reserves is recognised in

reserves. The cumulative post-acquisition movements are adjusted against the carrying amount of the investment.

When the Group’s share of losses in an associate equals or exceeds its interest in the associate, including any

other unsecured receivables, the Group does not recognise further losses, unless it has incurred obligations or

made payments on behalf of the associate. Unrealised gains on transactions between the Group and its associates

are eliminated to the extent of the Group’s interest in the associates. Unrealised losses are also eliminated unless

the transaction provides evidence of an impairment of the asset transferred.

Other investments

The other investments made by the Group are classified for the purpose of measurement into the following

categories:

Held to maturity

Investments with fixed maturity that the management has the intent and ability to hold to maturity are classified

as held to maturity and are initially measured at cost and at subsequent reporting dates measured at amortised

cost using the effective yield method.

Available for sale

The financial assets including investments in associated undertakings where the Group does not have significant

influence that are intended to be held for an indefinite period of time or may be sold in response to the need for

liquidity are classified as available for sale.

Investments classified as available for sale are initially measured at cost, being the fair value of consideration

given. At subsequent reporting dates, these investments are remeasured at fair value (quoted market price),

unless fair value cannot be reliably measured. The investments for which a quoted market price is not available,

are measured at cost as it is not possible to apply any other valuation methodology. Unrealised gains and losses

arising from the changes in the fair value are included in fair value reserves in the period in which they arise.

All purchases and sales of investments are recognised on the trade date which is the date that the Group commits

to purchase or sell the investment. Cost of purchase includes transaction cost.

At each balance sheet date, the Group reviews the carrying amounts of the investments to assess whether there

is any indication that such investments have suffered an impairment loss. If any such indication exists, the

recoverable amount is estimated in order to determine the extent of the impairment loss, if any. Impairment losses

are recognised as expense in the consolidated profit and loss account. In respect of ‘available for sale’ financial

assets, cumulative impairment loss less any impairment loss on that financial asset previously recognised in

consolidated profit and loss account, is removed from equity and recognised in the consolidated profit and loss

account. Impairment losses recognised in the consolidated profit and loss account on equity instruments are not

reversed through the consolidated profit and loss account.

4.9 Employee retirement benefits

The main features of the schemes operated by the Group for its employees are as follows:

4.9.1 Defined benefit plans

(a) All the executive staff participates in an approved funded defined benefit pension plan. In addition, there is an

approved funded defined benefit gratuity plan for all employees. Monthly contributions are made to these funds

on the basis of actuarial recommendation at the rate of 20 percent per annum of basic salaries for pension and

4.50 percent per annum of basic salaries for gratuity. The latest actuarial valuation for the pension and gratuity

schemes was carried out as at December 31, 2012. The actual returns on plan assets during the year were Rs.

160.162 million and Rs. 65.516 million for the pension and gratuity funds respectively. The actual returns on plan


141

assets represent the difference between the fair value of plan assets at beginning of the year and end of the year

after adjustments for contributions made by the Group as reduced by benefits paid during the year.

The future contribution rates of these plans include allowances for deficit and surplus. Projected unit credit

method, using the following significant assumptions, is used for valuation of these schemes:

Discount rate 11 percent per annum;

Expected rate of increase in salary level 9 percent per annum;

Expected mortality rate EFU 61-66 mortality table;

Expected rate of return 12.5 percent per annum; and

Future pension increase 2.5 percent per annum.

Plan assets include long-term Government bonds, equity instruments of listed companies and term deposits with

banks. Return on Government bonds and debt is at fixed rates, however, due to increased volatility of share prices

in recent months, there is no clear indication of return on equity shares, therefore, it has been assumed that the

yield on equity shares would match the return on debt.

The Group is expected to contribute Rs. 30.410 million to the pension fund and Rs. 12.422 million to the gratuity

fund in the next financial year.

The Group’s policy with regard to actuarial gains / losses is to follow minimum recommended approach under IAS

19 ‘Employee Benefits’.

In a meeting held on December 26, 2012 the board of trustees of the pension fund have decided to convert the

existing defined benefit plan to defined contribution plan for all its employees active as on December 31, 2012

with effect from January 1, 2013 subject to such regulatory approvals as are necessary in the circumstances.

The proposed scheme has been subsequently approved by the taxation authorities on February 22, 2013 and

respective employees consent with the proposed scheme has also been obtained in the subsequent period. This

conversion has been accounted for as a curtailment under IAS 19 - Employee benefits.

The Joint Venture agreement with Stora Enso requires all accumulated balances due and payable to the

employees in respect of pension and gratuity maintained with Packages Limited as a consequence of cessation

of their employment with Packages Limited to be transferred by Packages Limited to BSPL or directly paid to the

employees. This has been treated as a settlement as per IAS 19 - Employee Benefits.

(b) Accumulating compensated absences

The Group provides for accumulating compensated absences when the employees render services that increase

their entitlement to future compensated absences. The executives and workers are entitled to earned annual

and medical leaves on basis of their service with the Group. The annual leaves can be encashed at the time the

employee leaves the Group on the basis of the gross salary while no encashment is available for medical leaves

to executives.

The Group uses the valuation performed by an independent actuary as the present value of its accumulating

compensated absences.

Projected unit credit method, using the following significant assumptions, has been used for valuation of

accumulating compensated absences:

Discount rate 11 percent per annum;

Expected rate of increase in salary level 9 percent per annum; and

Expected mortality rate EFU 61-66 mortality table.

4.9.2 Defined contribution plan

There is an approved contributory provident fund for all employees. Equal monthly contributions are made by the

Group and the employees to the fund.

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Retirement benefits are payable to staff on completion of prescribed qualifying period of service under these schemes.

4.9.3 Pension plan is a multi-employer plan formed by the Parent Company in collaboration with Tri Pack Films Limited

and DIC Pakistan Limited. Similarly, Gratuity plan is also a multi-employer plan formed by the Parent Company in collaboration with DIC Pakistan Limited. Contribution by the Group companies is based on the respective number of employees of each company. Each Group company reports its proportionate share of the plan’s commitments, managed assets and costs, in accordance with guidance provided by IAS 19 - Employee Benefits, regarding defined benefit plans, based on the number of its employees participating in the plans.

4.10 Stores and spares

Stores and spares are valued at moving average cost, while items considered obsolete are carried at nil value. Items in transit are valued at cost comprising invoice value plus other charges paid thereon.

Provision is made in the financial statements for obsolete and slow moving stores and spares based on

management estimate. 4.11 Stock-in-trade

Stock of raw materials, except for those in transit, work-in-process and finished goods are valued principally at the lower of cost and net realisable value. Cost of raw materials is determined using the weighted average cost method. Cost of work-in-process and finished goods comprises direct production costs such as raw materials, consumables and labour as well as production overheads such as employee wages, depreciation, maintenance, etc. The production overheads are measured based on a standard cost method, which is reviewed regularly to ensure relevant measures of utilisation, production lead time etc.

Materials in transit are stated at cost comprising invoice value plus other charges paid thereon. If the expected sales price less completion costs and costs to execute sales (net realisable value) is lower than

the carrying amount, a write-down is recognised for the amount by which the carrying amount exceeds its net realisable value. Provision is made in the financial statements for obsolete and slow moving stock in trade based on management estimate.

4.12 Financial instruments

Financial assets and financial liabilities are recognised at the time when the Group becomes a party to the contractual provisions of the instrument and derecognised when the Group loses control of contractual rights that comprise the financial assets and in the case of financial liabilities when the obligation specified in the contract is discharged, cancelled or expired. Any gain or loss on derecognition of financial assets and financial liabilities is included in the consolidated profit and loss account for the year.

Financial instruments carried on the consolidated balance sheet include loans, investments, trade and other

debts, cash and bank balances, borrowings, trade and other payables, accrued expenses and unclaimed dividends. All financial assets and liabilities are initially measured at cost, which is the fair value of consideration given and received respectively. These financial assets and liabilities are subsequently measured at fair value or cost as the case may be. The particular recognition methods adopted are disclosed in the individual policy statements associated with each item.

4.13 Offsetting of financial assets and liabilities

Financial assets and liabilities are offset and the net amount is reported in the financial statements only when there is a legally enforceable right to set off the recognised amount and the Group intends either to settle on a net basis or to realise the assets and to settle the liabilities simultaneously.

4.14 Trade debts

Trade debts are recognized initially at fair value and subsequently measured at amortised cost using the effective interest method, less an estimate made for doubtful debts based on a review of all outstanding amounts at the year end. Bad debts are written off when identified.

4.15 Cash and cash equivalents

Cash and cash equivalents are carried in the consolidated balance sheet at cost. For the purpose of consolidated


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cash flow statement, cash and cash equivalents comprise cash in hand, demand deposits, other short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of change in value and finances under mark up arrangements. In the balance sheet, finances under mark up arrangements are included in current liabilities.

4.16 Non-current assets held for sale

Non-current assets are classified as assets held-for-sale when their carrying amount is to be recovered principally through a sale transaction and a sale is considered highly probable. They are stated at the lower of carrying amount and fair value less cost to sell.

4.17 Borrowings

Borrowings are initially recorded at the proceeds received. In subsequent periods, borrowings are stated at amortised cost using the effective yield method. Finance costs are accounted for on an accrual basis and are shown as accrued finance cost to the extent of the amount remaining unpaid.

4.18 Trade and other payables

Liabilities for creditors and other amounts payable are recognised at fair value and subsequently measured at amortised cost using the effective interest method.

4.19 Derivative financial instruments

These are initially recorded at cost on the date a derivative contract is entered into and are remeasured to fair value at subsequent reporting dates. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain derivatives as cash flow hedges.

The Group documents at the inception of the transaction the relationship between the hedging instruments and

hedged items, as well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in cash flow of hedged items.

The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow

hedges are recognised in consolidated statement of other comprehensive income. The gain or loss relating to the ineffective portion is recognised immediately in the consolidated profit and loss account.

Amounts accumulated in equity are recognised in consolidated profit and loss account in the periods when the

hedged item shall effect profit or loss. However, when the forecast hedged transaction results in the recognition of a non-financial asset or a liability, the gain and losses previously deferred in equity are transferred from equity and included in the initial measurement of the cost of the asset or liability.

4.20 Revenue recognition

Revenue is recognised on despatch of goods or on the performance of services. It includes sales to associates but doesn’t include sales by associates or sales between Group companies.

Return on deposits is accrued on a time proportion basis by reference to the principal outstanding and the

applicable rate of return. Dividend income and entitlement of bonus shares are recognised when right to receive such dividend and bonus

shares is established. 4.21 Foreign currency transactions and translation

Foreign currency transactions are translated into Pak Rupees using the exchange rates prevailing at the dates of the transactions. All monetary assets and liabilities in foreign currencies are translated into Pak Rupees at the rates of exchange prevailing at the balance sheet date. Foreign exchange gains and losses on translation are recognised in the consolidated profit and loss account. All non-monetary items are translated into Pak Rupees at exchange rates prevailing on the date of transaction or on the date when fair values are determined. Foreign exchange gains and losses are recognised in the consolidated profit and loss account except incase of items

recognised in equity in which case it is included in equity.

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For the purposes of consolidation, income and expense items of the foreign subsidiary are translated at annual

average exchange rate. All monetary and non monetary assets and liabilities are translated at the exchange

rate prevailing at the balance sheet date except for share capital which is translated at historical rate. Exchange

differences arising on the translation of foreign subsidiary are classified as equity reserve until the disposal of

interest in such subsidiary.

The financial statements are presented in Pak Rupees, which is the Group’s functional and presentation

currency.

4.22 Borrowing costs

Mark up, interest and other charges on borrowings are capitalised up to the date of commissioning of the related

property, plant and equipment acquired out of the proceeds of such borrowings. All other mark up, interest and

other charges are charged to consolidated profit and loss account.

4.23 Dividend

Dividend distribution to the shareholders is recognised as a liability in the period in which the dividends are

approved.

4.24 Compound financial instruments

Compound financial instruments issued by the Parent Company represent preference shares / convertible stock

that can be converted into ordinary shares or can be settled in cash.

The liability component of a compound financial instrument is recognised initially at the fair value of a similar

liability that does not have an equity conversion option. The equity component is recognised initially at the

difference between the fair value of the compound financial instrument as a whole and the fair value of the liability

component. Any directly attributable transaction costs are allocated to the liability and equity components in

proportion to their initial carrying amounts.

Subsequent to initial recognition, the liability component of a compound financial instrument is measured at

amortised cost using the effective interest method. The equity component of a compound financial instrument is

not re-measured subsequent to initial recognition except on conversion or expiry.

4.25 Segment reporting

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating

decision-maker. The chief operating decision-maker, who is responsible for allocating resources and assessing

performance of the operating segments, has been identified as the Board of Directors of the Parent Company.

4.26 Provisions

Provisions for environmental restoration, restructuring costs and legal claims are recognised when:

(i) the Group has a present legal or constructive obligation as a result of past events;

(ii) it is probable that an outflow of resources shall be required to settle the obligation; and

(iii) the amount has been reliably estimated.

Restructuring provisions include lease termination penalties and employee termination payments and such other

costs that are necessarily entailed by the restructuring and not associated with on going activities of the Group.

Provisions are not recognised for future operating losses.

Where there are a number of similar obligations, the likelihood that an outflow shall be required in settlement is

determined by considering the class of obligations as a whole. A provision is recognised even if the likelihood of

an outflow with respect to any one item included in the same class of obligations may be small.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation

using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to

the obligation. The increase in the provision due to passage of time is recognised as interest expense.


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5. Issued, subscribed and paid up capital

2012 2011 2012 2011 (Number of shares) (Rupees in thousand)

33,603,295 33,603,295 Ordinary shares of Rs. 10 each fully paid in cash 336,033 336,033

148,780 148,780 Ordinary shares of Rs. 10 each issued as fully paid

for consideration other than cash 1,488 1,488

50,627,429 50,627,429 Ordinary shares of Rs. 10 each issued as fully

paid bonus shares 506,274 506,274

84,379,504 84,379,504 843,795 843,795

21,082,601 (2011: 20,556,650) ordinary shares of the Parent Company are held by IGI Insurance Limited, an

associate.


6. Reserves

Movement in and composition of reserves is as follows:

Capital

Share premium 6.1 2,876,893 2,876,893

Exchange difference on translation of foreign subsidiary

At the beginning of the year 22,916 19,915 Exchange difference for the year (6,475) 3,001

16,441 22,916

Fair value reserve

At the beginning of the year 9,141,841 4,681,548 Fair value gain during the year 4,146,349 4,460,293

6.2 13,288,190 9,141,841

16,181,524 12,041,650

Revenue

General reserve

At the beginning of the year 16,160,333 16,660,333 Transferred to consolidated profit and loss account (1,250,000) (500,000)

14,910,333 16,160,333 Other reserves relating to associates

At the beginning of the year (17,511) - Income / (loss) during the year 17,511 (17,511)

- (17,511)

14,910,333 16,142,822 31,091,857 28,184,472

6.1 This reserve can be utilised by the Parent Company only for the purposes specified in section 83(2) of the

Companies Ordinance, 1984. 6.2 As referred to in note 4.8 this represents the unrealised gain on re-measurement of investments at fair value and

is not available for distribution. This shall be transferred to consolidated profit and loss account on derecognition of investments.

146


7. Long-term finances

These are composed of:

Local currency loan - secured

Consortium Loan 7.1.1 - 5,185,714

Term Finance Loan 7.1.2 1,000,000 1,000,000

Long-term Finance Facility 7.1.3 2,000,000 -

Term Loan 7.1.4 216,643 -

Others 7.1.5 - 300,000

3,216,643 6,485,714

Preference shares / convertible stock - unsecured 7.2 2,470,577 2,470,577

5,687,220 8,956,291

Current portion shown under current liabilities (1,000,000) (380,952)

4,687,220 8,575,339

7.1 Local currency loans - secured

7.1.1 Consortium Loan

This loan had been obtained from a consortium of commercial banks led by MCB Bank Limited. It is secured by a first

ranking exclusive hypothecation / equitable mortgage charge over all present and future fixed assets of the Parent

Company amounting to Rs. 6,914 million (2011: Rs. 6,914 million) in favour of MCB Bank Limited being security trustee

on behalf of consortium. It carried mark up at six month Karachi Inter Bank Offered Rate (KIBOR) plus 1.35 per cent per

annum and was payable in 11 unequal semi-annual installments that started in June 2012 and ending in June 2017. The

effective mark up charged during the year ranges from 13.31 per cent to 13.38 per cent per annum. This loan has been

prepaid by the Parent Company during the year using proceeds of short-term finances as referred to in note 15.1.5.

7.1.2 Term Finance Loan

The Parent Company had obtained a long-term loan from Bank Al-Habib Limited for expansion in its paper and board

manufacturing capacity. Out of the total disbursement, Rs. 578 million have been provided by Bank Al-Habib Limited

through its own source and Rs. 422 million have been provided under the State Bank of Pakistan’s Long Term Finance

Facility (LTFF). The entire amount is secured by a ranking charge over all present and future fixed assets of the Parent

Company amounting to Rs. 1,400 million (2011: Rs. 1,400 million) that has been subsequently modified. There is a pari

passu charge over all present and future fixed assets of the Parent Company amounting to Rs. 1,330 million (2011: Nil)

in favour of Bank Al-Habib Limited (BAHL). The Parent Company has prepaid this loan subsequent to the year end in

March 2013.

7.1.2.1 Loan under Term Finance Facility (BAHL own source)

The loan was disbursed in tranches of Rs. 500 million, Rs. 47 million and Rs. 31 million on May 20, 2011, July 6, 2011 and

December 30, 2011 respectively. It carries mark up at the rate of six month KIBOR plus 0.65 per cent per annum and is

repayable within 7 years (including two years grace period) in 10 equal semi-annual installments starting on November

19, 2013, January 5, 2014 and June 29, 2014 respectively and ending on May 19, 2018, July 5, 2018 and December 29, 2018

respectively. However, owing to the decision of the Parent Company to transfer the entire assets of its Kasur and Karachi

operations to its wholly owned subsidiary, BSPL, the Parent Company has prepaid the entire outstanding balance along

with the mark-up due thereon in March 2013. The effective mark up charged during the year ranges from 12.66 per cent

to 12.69 per cent per annum.

7.1.2.2 Loan under Long-term Finance Facility (under SBP-LTFF facility)

The loan obtained from Bank Al-Habib Limited under State Bank of Pakistan, Long Term Finance Facility of Rs. 422

million is comprised of Rs. 338 million and Rs. 84 million disbursed on July 6 ,2011 and November 16, 2011 respectively.

This carries a fixed mark up of 11.20 per cent and is repayable within 7 years (including two years grace period) in 10

equal semi-annual installments starting on January 5, 2014 and May 15, 2014 respectively and ending on July 5, 2018

and November 15, 2018 respectively. However, owing to the decision of the Parent Company to transfer the entire assets

of its Kasur and Karachi operations to its wholly owned subsidiary, BSPL, the Parent Company has prepaid the entire

outstanding balance along with the mark up due thereon in March 2013.


147

7.1.3 Long-Term Finance Facility

This loan has been obtained from Meezan Bank Limited under the Islamic mode of finance as a Musharika. It is secured by a pari passu charge over all present and future fixed assets of the Parent Company amounting to Rs. 2,500 million. It carries mark up at six month KIBOR plus 0.65 per cent per annum and is repayable in 7 equal semi-annual instalments starting in December 26, 2016 and ending December 28, 2019. The effective mark up charged during the year is 10.07 per cent per annum.

7.1.4 Term Loan

Term loan has been obtained from MCB Bank Limited Sri Lanka that is repayable over seven years including two years grace period.

7.1.5 Others

This loan had been obtained from Citibank. It was secured by a first ranking exclusive hypothecation / equitable mortgage charge over all present and future fixed assets of the Parent Company amounting to Rs. 419 million (2011: Rs. 419 million) in favour of MCB Bank Limited being security trustee on behalf of Citibank. It carried mark up at six month KIBOR plus 0.90 per cent per annum and was payable in 4 unequal semi-annual installments that started in December 2011 and ending June 2013. The effective mark up charged during the year ranges from 12.86 per cent to 12.93 per cent per annum. This loan has been prepaid by the Parent Company during the year using proceeds of short-term finances as referred to in note 15.1.5.

7.2 Preference shares / convertible stock - unsecured

During the year 2009, the Parent Company issued 10 per cent local currency non-voting cumulative preference shares / convertible stock at the rate of Rs. 190 per share amounting to USD 50 million equivalent to PKR 4,120.5 million under “Subscription Agreement” dated March 25, 2009 with IFC.

Terms of redemption / conversion

Each holder of preference shares / convertible stock shall have a right to settle at any time, at the option of holder, either in the form of fixed number of ordinary shares, one ordinary share for one preference share / convertible stock, or cash. The Parent Company may, in its discretion, refuse to purchase the preference shares / convertible stock offered to it for purchase in cash. In case of refusal by the Parent Company, preference shareholders shall have the right to either retain the preference shares / convertible stock or to convert them into ordinary shares of the Parent Company. The preference shares / convertible stock can be held till perpetuity if preference shareholders do not opt for the conversion or cash settlement.

Rate of return

The preference share / convertible stock holders have a preferred right of return at the rate of 10 per cent per annum on a cumulative basis till December 31, 2013 and thereafter, these shall become non-cumulative till the date of settlement of preference shares / convertible stock either in cash or ordinary shares of the Parent Company.

Preference shares / convertible stock are recognised in the consolidated balance sheet as follows:


Face value of preference shares / convertible stock 4,120,500 4,120,500

Transaction costs (44,048) (44,048)

4,076,452 4,076,452

Equity component - classified under capital and reserves (1,605,875) (1,605,875)

Liability component - classified under long-term finances 2,470,577 2,470,577

Accrued return on preference shares / convertible stock

classified under accrued finance cost 412,050 412,050

The fair value of the liability component of the preference shares / convertible stock is calculated by discounting cash

flows at a rate of approximately 16.50 per cent till perpetuity which represents the rate of similar instrument with no

associated equity component. The residual amount, representing the value of the equity conversion component, is

included in shareholders equity as preference shares / convertible stock reserve.

148


8. Deferred income tax liabilities

The liability for deferred taxation comprises temporary differences

relating to:

Accelerated tax depreciation 551,041 3,978,208

Unused tax losses (132,163) (1,684,974)

Minimum tax available for carry forward 8.1 - (203,745)

Provision for accumulating compensated absences (63,829) (57,799)

Provision for doubtful debts (18,508) (14,633)

Preference shares / convertible stock transaction cost -

liability portion 9,267 8,946

Provision for slow moving items - (1,496)

Provision for doubtful receivables - (527)

Investments in associates 165,000 611,000

Exchange difference - 184

Provision for unfunded defined benefit plan - (2,320)

510,808 2,632,844

8.1 The Group has not adjusted the net deferred tax liability against aggregate tax credits of Rs. 566.842 million (2011: Rs.

300.571 million) and Rs. 261.474 million (2011: Rs. 196.059 million) available to the Parent Company under section 113

and section 65B of the Income Tax Ordinance, 2001 (‘Ordinance’) respectively and unused tax losses of Nil (2011: Rs.

132.163 million) in view of the management’s estimate that the Parent Company may not be able to offset these against

tax liability arising in respect of relevant business profits of future periods, before these expire / lapse. Tax credits under

section 113 of the Ordinance amounting to Rs. 68.813 million, Rs. 183.823 million, Rs. 203.917 million and Rs. 110.288

million are set to lapse by years ending on December 31, 2014, 2015, 2016 and 2017 respectively. Tax credit under

section 65B of the Ordinance amounting to Rs. 190.334 million and Rs. 71.140 million shall lapse by years ending on

December 31, 2013 and 2014 respectively.


9. Retirement benefits

Classified under non-current liabilities

Pension fund 86,512 12,358

Classified under non-current assets

Gratuity fund 39,009 89,299



The amounts recognised in the consolidated balance

sheet are as follows:

Fair value of plan assets 305,573 685,750 243,384 317,168

Present value of defined benefit obligation (582,032) (1,092,581) (273,734) (314,074)

Unrecognised actuarial loss 189,947 394,473 69,359 86,205

(Liability) / asset as at December 31 (86,512) (12,358) 39,009 89,299

Net (liability) / asset as at January 1 (12,358) (167) 89,299 94,557

Charge to consolidated profit and loss account (132,248) (61,520) (66,156) (18,760)

Contribution by the Parent Company 58,094 49,329 15,866 13,502

Net (liability) / asset as at December 31 (86,512) (12,358) 39,009 89,299


149



The movement in the present value of defined benefit

obligation is as follows:

Present value of defined benefit obligation as

at January 1 1,092,581 890,215 314,074 285,349

Service cost 31,488 33,979 18,448 18,693

Interest cost 132,649 122,923 35,664 38,724

Benefits paid (62,772) (55,192) (57,528) (27,201)

Settlements (553,090) - (97,638) -

Curtailment / settlement (gain) / loss (196,267) - 17,182 -

Experience loss / (gain) 137,443 100,656 43,532 (1,491)

Present value of defined benefit obligation as

at December 31 582,032 1,092,581 273,734 314,074

The movement in fair value of plan assets is as follows:

Fair value as at January 1 685,750 649,568 317,168 304,449

Expected return on plan assets 86,516 93,200 37,042 42,408

Parent Company contributions 58,094 49,329 15,866 13,502

Employee contributions 17,428 14,803 - -

Benefits paid (62,772) (55,192) (57,528) (27,201)

Settlements (553,090) - (97,638) -

Experience gain / (loss) 73,647 (65,958) 28,474 (15,990)

Fair value as at December 31 305,573 685,750 243,384 317,168

The amounts recognised in the consolidated profit

and loss account are as follows:

Current service cost 31,488 33,979 18,448 18,693

Interest cost for the year 132,649 122,923 35,664 38,724

Expected return on plan assets (86,516) (93,200) (37,042) (42,408)

Contribution made by the employees (17,428) (14,803) - -

Curtailment / settlement losses charged out of

unrecognised actuarial losses 244,554 - 27,362 -

(Gain) / loss on curtailment / settlement

recognised out of obligation (196,267) - 17,182 -

Recognition of loss 23,768 12,621 4,542 3,751

Total included in salaries, wages and amenities 132,248 61,520 66,156 18,760

Plan assets are comprised as follows:

Debt 133,829 327,260 263,133 235,911

Equity 471,744 185,409 71,210 79,897

Cash 253,090 173,081 6,679 1,360

858,663 685,750 341,022 317,168

Settlements (553,090) - (97,638) -

305,573 685,750 243,384 317,168

150

The present value of defined benefit obligation, the fair value of plan assets and the deficit or surplus of pension fund is as follows:


As at December 31

Present value of defined benefit obligation 582,032 1,092,581 890,215 767,086 595,808


Deficit (276,459) (406,831) (240,647) (175,000) (102,720)

Experience adjustment on obligation 13% 11% 5% 6% 1%

Experience adjustment on plan assets 11% -10% 0% 5% -51%

Fair value of plan assets include ordinary shares of the Parent Company, whose fair value as at December 31, 2012

is Rs. 99.771 million (2011: Rs. 54.598 million). The present value of defined benefit obligation, the fair value of plan assets and the surplus of gratuity fund is as follows:


As at December 31

Present value of defined benefit obligation 273,734 314,074 285,349 247,893 211,836


(Deficit) / Surplus (30,350) 3,094 19,100 55,532 71,638

Experience adjustment on obligation 14% -1% 9% 5% 9%

Experience adjustment on plan assets 9% -5% -3% -1% -10%

Fair value of plan assets include ordinary shares of the Parent Company, whose fair value as at December 31, 2012

is Rs. 15.795 million (2011: Rs. 8.644 million).


10. Deferred liabilities

Accumulating compensated absences 10.1 133,359 172,022

Staff gratuity 10.2 8,528 7,949

141,887 179,971

10.1 Accumulating compensated absences

This represents provision made to cover the obligation for

accumulating compensated absences.


Provision for the year 54,182 25,227

226,204 182,584


196,163 172,022

Settlement to be made for employees of Discontinued

operations shown under accrued liabilities 10.1.1 (62,804) -


10.1.1 This represents the obligations in respect of employees that are to be transferred to BSPL under the JV Agreement

referred to in note 1 to these financial statements. Since this amount is to be settled by the Parent Company before equity participation by Stora Enso into BSPL, it has been classified as a current liability and included in trade and other payables as referred to in note 13 to these financial statements.

10.2 Staff gratuity

This represents staff gratuity of employees of Packages Lanka (Private) Limited and is unfunded.


151


11. Finances under mark up arrangements - secured

Running finances - secured 11.1 258,404 275,227

Bills discounted - secured 11.2 - -

Short-term finances - secured 11.3 993,059 895,000

1,251,463 1,170,227

11.1 Running finances - secured

Short-term running finances available from a consortium of commercial banks under mark up arrangements amount to Rs. 9,413 million (2011: Rs. 8,875 million). The rates of mark up range from Re. 0.2608 to Re. 0.3622 per Rs. 1,000 per diem or part thereof on the balances outstanding. In the event the Group fails to pay the balances on the expiry of the quarter, year or earlier demand, mark up is to be computed at the rates ranging from Re. 0.5479 to Re. 0.6849 per Rs. 1,000 per diem or part thereof on the balances unpaid. The aggregate running finances are secured by hypothecation of stores, spares, stock-in-trade and trade debts.

11.2 Bills discounted - secured

Facilities for discounting of export / inland bills of Rs. 581 million (2011: Rs. 581 million) are available to the Group as a sub-limit of the running finance facilities referred to in note 11.1. Mark up is fixed as per mutual agreement at the time of transaction. The outstanding balance of bills discounted is secured, in addition to the securities referred to in note 11.1, on the specific bills discounted. The facility has not been availed in the current year.

11.3 Short-term finances - secured

Facilities for obtaining short-term finances of Rs. 6,975 million (2011: Rs. 6,015 million) are available to the Group as a sub-limit of the running finance facilities referred to in note 11.1. The rates of mark up range from Re. 0.2569 to Re. 0.3348 per Rs. 1,000 per diem or part thereof on the balances outstanding.

11.4 Letters of credit and bank guarantees

Of the aggregate facility of Rs. 7,573 million (2011: Rs. 6,458 million) for opening letters of credit and Rs. 1,294 million (2011: Rs. 1,294 million) for guarantees, the amount utilised at December 31, 2012 was Rs. 895.964 million (2011: 602.784 million) and Rs. 606.653 million (2011: Rs. 621.581 million) respectively. Of the facility for guarantees, Rs. 1,294 million (2011: Rs. 1,294 million) is secured by second hypothecation charge over stores, spares, stock-in-trade and trade debts.

12 Derivative financial instruments

Liability in respect of arrangements under the JV Agreement

This represents amount in respect of arrangements under the JV Agreement between the Parent Company and Stora Enso referred to in note 1; which provide Stora Enso the right, in case certain conditions specified in the JV Agreement are not met, and obligates Stora Enso, in case certain conditions specified in the JV Agreement are met, to subscribe to the share capital of BSPL. A key condition of such right and obligation relates to the envisaged Joint Venture achieving specified EBITDA, to which the subscription price is also linked. It is included in the loss recognised on re-measurement of the disposal group classified as held for sale referred to in note 15.2.


13. Trade and other payables

Trade creditors 13.1 865,735 806,406

Accrued liabilities 13.2 757,724 631,879

Bills payable 171,271 27,210

Retention money payable 59,250 59,250

Sales tax payable 84,007 97,577

Advances from customers 13.3 145,181 125,697

Deposits - interest free repayable on demand 11,136 15,021

Workers’ welfare fund 13.4 2,911 3,596

Workers’ profit participation fund 27.3 - 124

TFCs payable 1,387 1,387

Unclaimed dividends 12,448 11,923

Others 51,155 51,867

2,162,205 1,831,937

152

13.1 Trade creditors include amounts due to related parties Rs. 127.040 million (2011: Rs. 54.799 million).

13.2 Accrued liabilities include amounts in respect of related parties Rs. 34.508 million (2011: Rs. 32.571 million). It also

includes an amount of Rs. 62.804 million (2011: Nil) as referred to in note 10.1.

13.3 Advances from customers include amounts from related party Rs. 0.911 million (2011: Rs. 10.313 million).


13.4 Workers’ welfare fund


Provision for the year 34 3,000 3,596

6,596 6,354



14. Accrued finance cost

Accrued mark up / return on:

Long-term local currency loans - secured 49,438 103,109

Preference shares / convertible stock - unsecured 412,050 412,050

Finances under mark up arrangements - secured 81,699 26,872

543,187 542,031

15. Disposal group classified as held for sale and Discontinued operations

As more fully explained in note 1 to these consolidated financial statements, the disposal group comprises of the

Paperboard and Corrugated business operations at Kasur and Karachi. The assets and liabilities of this disposal

group have been separately classified as held for sale in note 15.1. In connection with this the profit and loss

account for these operations has also been separately classified as a discontinued operation in note 15.2.

Moreover, the Discontinued operations also include the Paper and Paperboard operations in Lahore that have

been discontinued during the year, the profit and loss account of which is separately presented in note 15.2.


15.1 Assets and liabilities of disposal group classified as held for sale

a) Assets classified as held for sale

Operating assets 15.1.1 10,249,450

Capital work-in-progress 162,365

Intangible assets 10,021

Stores and spares 695,153

Stock-in-trade 3,426,302

Total assets of the disposal group 14,543,291

b) Liabilities directly associated with assets classified as held for sale

Deferred income tax liabilities 15.1.4 551,513

Short term finances - secured 15.1.5 5,100,000

Other payables 17,684

Total liabilities of the disposal group 5,669,197


153


15.1.1 Operating assets

Assets of disposal group classified as held-for-sale as at September 30, 2012 14,672,768

Net book value of additions till December 31, 2012 32,402

Net book value of deletions till December 31, 2012 (1,591)

14,703,579

Loss recognised on the re-measurement of assets of disposal group 15.1.2 (4,454,129)

Carrying value as on December 31, 2012 10,249,450

15.1.2 Loss recognised on the re-measurement of assets of disposal group

This represents the difference between the carrying values of net assets to be transferred to BSPL and the

estimated fair value thereof in the form of Parent Company’s interest in the envisaged joint venture, net of the

amount as described in note 12.

15.1.3 Included in property, plant and equipment, there are certain capital expenditure incurred by the Parent Company

subsequent to the signing of the JV Agreement, which the Parent Company believes are reimbursable by BSPL under

the terms of the JV Agreement subject to consent of Stora Enso. The Parent Company has claimed Rs. 226 million

in this respect, and discussion are in progress with Stora Enso for their approval. However, no receivable has been

recognised in these financial statements in respect of the above mentioned amount as the matter is in the process of

being finalised.


15.1.4 Deferred income tax liabilities

The liability for deferred taxation comprises temporary differences relating to:

Accelerated tax depreciation 2,011,843

Un-absorbed tax depreciation (1,460,330)

551,513

The tax losses as at December 31, 2012 transferable to BSPL are estimated approximately at Rs. 4,172.371 million

(2011: Rs. 4,802.733 million).

15.1.5 Short-term finances - secured

This represents a short-term loan obtained from MCB Bank Limited and Allied Bank Limited to repay the

consortium loan referred to in note 7.1.1 and loan from Citibank referred to in note 7.1.5. It is secured against

pledge of 2,100,000 shares of Nestle Pakistan Limited as referred to in note 21.1. It carries mark up at three month

KIBOR plus 0.75% per annum and is repayable on June 5, 2013. The effective mark up charged during the year is

10.18 per cent per annum.

15.1.6 Commitments in respect of disposal group classified as held for sale

(i) Letters of credit and contracts for capital expenditure Rs. 2.242 million (2011: Nil).

(ii) Letters of credit and contracts other than for capital expenditure Rs. 369.488 million (2011: Nil).

(iii) The amount of future payments under operating leases and the period in which these payments shall become

due are as follows:


Not later than one year 346 305

Later than one year and not later than five years 268 392

614 697

154

15.2 Profit and loss account - Discontinued operations

Paper & Paperboard and Corrugated Paper & Paperboard business operations operations at Kasur and Karachi at Lahore Total

2012 2011 2012 2011 2012 2011(Rupees in thousand) Note Represented Represented Represented

Local sales 10,039,377 8,834,315 42,002 212,521 10,081,379 9,046,836

Export sales 27,642 52,730 - 87,781 27,642 140,511

10,067,019 8,887,045 42,002 300,302 10,109,021 9,187,347

Less: Sales tax and excise duty 1,357,088 1,283,810 3,523 31,314 1,360,611 1,315,124

Commission 34 1,092 - - 34 1,092

1,357,122 1,284,902 3,523 31,314 1,360,645 1,316,216

8,709,897 7,602,143 38,479 268,988 8,748,376 7,871,131

Sales to continuing operations 1,954,155 1,559,692 - - 1,954,155 1,559,692

10,664,052 9,161,835 38,479 268,988 10,702,531 9,430,823

Cost of sales (10,105,223) (10,145,609) (294,164) (288,487) (10,399,387) (10,434,096)

Gross profit / (loss) 558,829 (983,774) (255,685) (19,499) 303,144 (1,003,273)

Administrative expenses 15.2.1 (352,349) (263,810) (40,879) (64,978) (393,228) (328,788)

Distribution and selling costs (186,631) (146,740) (16,718) (29,948) (203,349) (176,688)

Other operating expenses (38,472) (18,895) (15,942) (1,066) (54,414) (19,961)

Other operating income 36,729 32,060 7,963 32,988 44,692 65,048

Profit / (loss) from operations 18,106 (1,381,159) (321,261) (82,503) (303,155) (1,463,662)

Finance cost (974,093) (988,600) (3,411) (13,061) (977,504) (1,001,661)

Loss before tax from discontinued operations (955,987) (2,369,759) (324,672) (95,564) (1,280,659) (2,465,323)

Taxation 154,092 756,093 113,828 28,155 267,920 784,248

Loss after tax from discontinued operations (801,895) (1,613,666) (210,844) (67,409) (1,012,739) (1,681,075)

Loss before tax recognised on the


Taxation 1,616,541 - - - 1,616,541 -

Loss after tax recognised on the


Loss for the year from discontinued operations (3,804,042) (1,613,666) (210,844) (67,409) (4,014,886) (1,681,075)

15.2.1 Included in administrative expenses of Paper & Paperboard and Corrugated business operations at Kasur and Karachi

is an amount of Rs. 5.613 million (2011: Nil) and Rs. 7.338 million (2011: Nil) on account of legal and professional

services and travelling respectively in respect of transaction referred to in note 1 to these financial statements.

15.3 Cash flow from Discontinued operations


2012 2011 2012 2011 2012 2011(Rupees in thousand) Represented Represented Represented

Cash flows from operating activities (479,958) (2,035,381) 162,046 805,345 (317,912) (1,230,036)

Cash flows from investing activities (173,772) (1,153,303) 49,160 28,081 (124,612) (1,125,222)

Cash flows from financing activities (5,485,714) 985,714 - - (5,485,714) 985,714

Total cash flows (6,139,444) (2,202,970) 211,206 833,426 (5,928,238) (1,369,544)


155

16. Contingencies and commitments

16.1. Contingencies

(i) Claims against the Parent Company not acknowledged as debts Rs. 25.860 million (2011: Rs. 18.612

million).

(ii) Post dated cheques not provided in the financial statements have been furnished by the Parent Company in

favour of the Collector of Customs against custom levies aggregated to Rs. 217.102 million (2011: Rs. 102.219

million) in respect of goods imported.

16.2. Commitments in respect of

(i) Letters of credit and contracts for capital expenditure Rs. 81.017 million (2011: Rs. 310.397 million).

(ii) Letters of credit and contracts other than for capital expenditure Rs. 661.831 million (2011: Rs. 463.874

million).

(iii) The amount of future payments under operating leases and Ijarah financing and the period in which these

payments shall become due are as follows:



688,340 1,020,44217. Property, plant and equipment

Operating assets 17.1 3,629,740 18,559,649 Capital work-in-progress 17.2 390,993 125,683

4,020,733 18,685,332

17.1 Operating assets

2012

Exchange Assets of Accumulated adjustment Depreciation Assets of Accumulated Book value Cost as at Exchange disposal group Cost as at depreciation as on opening charge / disposal group depreciation as at December Adjustment on Addition / Transfer in classified as December at December accumulated (deletions) Transfer in classified as as at December December 31, 2011 opening cost (deletions) (note 18) held for sale 31, 2012 31, 2011 depreciation for the year (note 18) held for sale 31, 2012 31, 2012 (Rupees in thousand)

Freehold land 351,131 (811) - - (105,167) 245,153 - - - - - - 245,153

Buildings on freehold land 3,236,086 (2,140) 16,328 - (2,818,001) 432,273 554,838 (837) 92,830 - (479,886) 166,945 265,328

Buildings on leasehold land 191,543 - 3,072 9,936 - 204,551 86,454 - 7,202 7,095 - 100,751 103,800

Plant and machinery 24,216,842 (385) 895,187 - (16,899,351) 7,945,095 9,136,787 (5,530) 1,097,987 - (4,738,318) 5,291,757 2,653,338

(267,198) (199,169)


equipments and other office equipments) 638,613 1,138 122,674 - (78,374) 678,653 480,811 (1,769) 60,628 - (46,001) 488,491 190,162

(5,398) (5,178)

Furniture and fixtures 42,159 85 5,754 - (5,923) 41,481 32,551 (81) 2,655 - (2,769) 31,764 9,717

(594) (592)

Vehicles 354,796 (129) 78,914 - (87,875) 288,273 180,080 (88) 37,226 - (54,949) 126,031 162,242

(57,433) (36,238)

29,031,170 (2,242) 1,121,929 9,936 (19,994,691) 9,835,479 10,471,521 (8,305) 1,298,528 7,095 (5,321,923) 6,205,739 3,629,740

(330,623) (241,177)

156

2011

Exchange Assets written Accumulated adjustment Depreciation Assets written Accumulated Book value Cost as at Exchange off due to Cost as at depreciation on opening charge / off due to depreciation as at December Adjustment on Addition / Transfer in fire December as at December accumulated (deletions) Transfer in fire as at December December 31, 2010 opening cost (deletions) (note 18) (note 17.1.4) 31, 2011 31, 2010 depreciation for the year (note 18) (note 17.1.4) 31, 2011 31, 2011 (Rupees in thousand)

Freehold land 360,668 304 2,185 - - 351,131 - - - - - - 351,131

(12,026)

Buildings on freehold land 3,239,070 600 55,548 - (58,832) 3,236,086 449,937 297 130,869 - (25,965) 554,838 2,681,248

(300) (300)

Buildings on leasehold land 203,492 - - - (11,949) 191,543 84,122 - 7,704 - (5,372) 86,454 105,089

Plant and machinery 22,908,305 3,593 1,986,687 - (193,420) 24,216,842 8,311,144 2,383 1,415,236 - (104,275) 9,136,787 15,080,055

(488,323) (487,701)


equipments and other office equipments) 599,497 768 48,744 - (5,453) 638,613 430,467 696 59,186 - (4,915) 480,811 157,802

(4,943) (4,623)

Furniture and fixtures 40,256 9 2,047 - - 42,159 29,955 37 2,700 - - 32,551 9,608

(153) (141)

Vehicles 320,493 48 62,096 - - 354,796 156,513 37 41,709 - - 180,080 174,716

(27,841) (18,179)

27,671,781 5,322 2,157,307 - (269,654) 29,031,170 9,462,138 3,450 1,657,404 - (140,527) 10,471,521 18,559,649

(533,586) (510,944)

17.1.1 Property, plant and equipment include assets amounting to Rs. 43.498 million (2011: Rs. 83.515 million) of the

Group which are not in operation.

17.1.2 The cost of fully depreciated assets which are still in use as at December 31, 2012 is Rs. 3,862.098 million (2011:

Rs. 3,450.527 million).

17.1.3 The depreciation charge for the year has been allocated as follows:

Discontinued operations Discontinued Paper & Paperboard and operations Corrugated business Paper & Paperboard Continuing operations at Kasur and Karachi at Lahore Total

(Rupees in thousand) Note 2012 2011 2012 2011 2012 2011 2012 2011

Cost of sales 30 371,781 337,607 852,967 1,229,216 34,003 55,071 1,258,751 1,621,894

Administrative

expenses 31 21,686 19,282 7,493 6,371 1,140 1,399 30,319 27,052

Distribution and

marketing costs 32 7,142 6,244 1,595 1,516 721 698 9,458 8,458

400,609 363,133 862,055 1,237,103 35,864 57,168 1,298,528 1,657,404

17.1.4 During the last year fire at the tissue conversion line and stores damaged certain items of property, plant and

equipment with an aggregate book value of Rs. 129.127 million. The Parent Company had claimed such loss from

its insurance providers in accordance with the relevant insurance policies as referred to in note 35.1.


157

17.1.5 Disposal of property, plant and equipment

Detail of property, plant and equipment disposed off during the year is as follows: (Rupees in thousand) 2012




Pak Board Mill, Muhammad Amin Dogar, Jutt Brothers, Boss Links 181,508 113,479 68,029 46,502 Negotiation Other Equipments Outsiders M/s. Iqbal Jutt 650 509 141 173 Negotiation Vehicles Employees Abida Akram 477 346 131 253 Group policy Adnan Tufail 402 296 106 192 -do- Ali Hassan Siddique 495 142 353 358 -do- Ali Usman Awan 725 278 447 568 -do- Amad Ud Din 579 326 253 212 -do- Amir Janjua 979 710 269 590 -do- Ammarah Javed Agha 581 93 488 498 -do- Arslan Tauheed Abbasi 495 99 396 421 -do- Asma Yousaf 476 345 131 247 -do- Ataunnoor Ahmad 381 285 96 169 -do- Athar Riaz 615 454 161 365 -do- Attia Jamal 617 463 154 337 -do- Ayaz Haseeb 360 270 90 160 -do- Babar Hussain 849 637 212 556 -do- Behram Nazir 414 233 181 219 -do- Faraz Zafar 707 64 643 601 -do- Farhan M.Jaffer 716 105 611 629 -do- Farid Ahmad 1,269 555 714 980 -do- Hassan Alam 685 163 522 530 -do- Haseeb Riaz 519 97 422 420 -do- Hassan Ahmed Mughal 384 245 139 202 -do- Iftikhar Ahmad 705 529 176 439 -do- Iftikhar Ahmad 1,232 462 770 875 -do- Ijaz Ahmad 988 580 408 629 -do- Ishtiaq Ur Rehman 385 231 154 203 -do- Jananzeb Khan 1,157 868 289 807 -do- Kamal Bariq 401 291 110 191 -do- Kamran Jamshed 850 425 425 485 -do- Khalid Bin Yousaf 700 236 464 515 -do- Khalid Mehmood 800 340 460 572 -do- Majeed Ghani 585 307 278 362 -do- Mian Javaid Iqbal 820 595 225 532 -do- Mubashir Ahmad Sheikh 845 412 433 519 -do- Mudussar Anjum 384 259 125 177 -do- Muhammad Tariq 427 320 107 207 -do- Muhammad Ahmad 665 283 382 450 -do- Muhammad Amin 374 266 108 169 -do- Muhammad Anis 643 113 530 511 -do- Muhammad Faraz 396 262 134 208 -do- Muhammad Usman Akram 480 222 258 256 -do- Mustansar Bashir 475 339 136 251 -do- Naeem Shaukat 1,000 300 700 821 -do- Nauman Majeed Khan 1,318 264 1,054 952 -do- Naveed Ehsaan 859 268 591 689 -do- Omer Qureshi 366 275 91 138 -do- Rameez Jahangir 754 68 686 646 -do- Rana Sher Afghan 610 130 480 465 -do- Carried Forward 211,572 128,264 83,308 66,202

158




Brought Forward 211,572 128,264 83,308 66,202

Vehicles Sajjad Iftikhar 576 425 151 255 Group policy

Samreen Saleem 362 258 104 161 -do-

Shabee 378 217 161 197 -do-

Shabir Hussain 564 310 254 353 -do-

Shahida Naeem 940 693 247 630 -do-

Shoaib Nangiana 571 428 143 589 Negotiation

Shoaib Saleem 479 317 162 255 Group policy

Syed Ahmad Mujtaba 360 270 90 160 -do-

Syed Babar Hussain 549 99 450 460 -do-

Tahir Mahmood 380 285 95 174 -do-

Usman Ghani 660 289 371 446 -do-

Usman Tahir 463 168 295 286 -do-

Zaid Ashraf Nizami 498 137 361 361 -do-

Outsiders

Adnan Rafique Qureshi 900 675 225 860 Negotiation

IGI Insurance Limited - Related party 4,706 1,621 3,085 4,329 Insurance Claim

Maheen Saqib 916 687 229 800 Negotiation

Maswar Subhani 1,072 804 268 725 -do-

Other assets with

book value less

than Rs. 50,000 205,796 205,713 83 36,855

433,272 342,235 91,037 115,147


159


Particulars Accumulated Sales Mode ofof assets Sold to Cost depreciation Book value proceeds disposal

Land Outsiders

Haji Muhammad Ibrahim and others 12,026 - 12,026 143,550 Negotiation

Buildings Outsiders

IGI Insurance Limited - Related Party 70,781 31,337 39,444 70,281 Insurance Claim Plant and machinery Outsiders

IGI Insurance Limited - Related Party 199,022 109,877 89,145 103,000 Insurance Claim Muhammad Amin 476,063 475,979 84 28,810 Negotiation

Other Equipments Outsiders

IGI Insurance Limited - Related Party 5,453 4,915 538 2,131 Insurance Claim IGI Insurance Limited - Related Party 737 530 207 198 Insurance Claim Vehicles Employees

Adnan Yousaf 487 134 353 352 Group policy Akhtar Javed 618 456 162 368 -do- Almaee Hassan Jafri 1,278 208 1,070 1,071 -do- Dr. Arshad Mahmood 1,349 590 759 983 -do- Ehtisham Qureshi 520 390 130 288 -do- Faisal Amjad 403 302 101 192 -do- Ghulam Sarwar 610 267 343 434 -do- Hafiz Farhan Muhammad Jaffar 372 270 102 167 -do- Ishtiaq Ahmad 507 342 165 277 -do- Javed Iqbal 368 258 110 164 -do- Maheen Saqib 467 157 310 359 -do- Mehreen Bilal 366 192 174 191 -do- Mohammad Yasin 507 349 158 310 -do- Mubashir Ahmed 475 71 404 410 Negotiation Muhammad Ali 480 348 132 255 Group policy Muhammad Farhan 450 321 129 231 -do- Muhammad Haroon 329 247 82 650 Negotiation Muhammad Imran Aziz 610 168 442 469 Group policy Muhammad Ismail 625 461 164 373 -do- Muhammad Naveed 354 252 102 157 -do- Muhammad Rizwan 841 630 211 549 -do- Muhammad Uffan Sharif 525 394 131 292 -do- Muhammad Umar Rashid 523 392 131 290 -do- Sajjad Hussain 623 467 156 372 -do- Sajjad Nadeem 515 386 129 284 -do- Shoaib Kazi 697 61 636 631 -do- Suleman Javed 825 608 217 464 -do- Syed Haris Raza 520 273 247 321 -do- Syed Ihsanullah Shah 402 302 100 192 -do- Syed Kashif Alam 375 239 136 170 -do- Zafar Ahmad 700 105 595 617 -do-

Outsiders

IGI Insurance Limited - Related Party 552 - 552 - Insurance Claim Muhammad Jawaid 4,037 3,009 1,028 392 Negotiation Other assets with

book value less

than Rs. 50,000 16,848 16,184 664 5,335 -

803,240 651,471 151,769 365,580

160


17.2 Capital work-in-progress

Civil works 172,830 15,784

Plant and machinery [including in transit Rs. 95.652 million (2011: Nil)] 197,731 105,571

Others 246 235

Advances 20,186 4,093

390,993 125,683

17.2.1 During the last year fire at the tissue conversion line and stores damaged certain items of capital work-in-progress with an aggregate book value of Rs. 2,679 million. The Parent Company had claimed such loss from its insurance providers in accordance with the relevant insurance policies as referred to in note 35.1.

2011

Accumulated Accumulated Book value Cost as at Cost as at depreciation Depreciation depreciation as at December December as at December charge as at December December 31, 2010 Transfer out 31, 2011 31, 2010 for the year Transfer out 31, 2011 31, 2011 (Rupees in thousand)

Buildings on leasehold land 15,976 - 15,976 10,387 328 - 10,715 5,261

15,976 - 15,976 10,387 328 - 10,715 5,261

18.1 Depreciation charge for the year has been allocated to administrative expenses as referred to in note 31.

18.2 Fair value of the investment property, based on the valuation carried out by an independent valuer, as at December 31,

2012 is Rs. 16.863 million (2011: Rs. 38.797 million).

18. Investment property 2012

Accumulated Accumulated Book value Cost as at Cost as at depreciation Depreciation depreciation as at December Transfer out December as at December charge Transfer out as at December December 31, 2011 (note 17.1) 31, 2012 31, 2011 for the year (note 17.1) 31, 2012 31, 2012 (Rupees in thousand)

Buildings on leasehold land 15,976 (9,936) 6,040 10,715 312 (7,095) 3,932 2,108

15,976 (9,936) 6,040 10,715 312 (7,095) 3,932 2,108


19. Intangible assets

This represents computer software and ERP system.

Cost As at January 1 183,259 144,598 Additions 12,040 38,661 Deletions (637) -

As at December 31 194,662 183,259

Accumulated amortisation As at January 1 (133,425) (128,499) Amortisation for the year 19.1 (11,821) (4,926) Deletions 637 -

As at December 31 (144,609) (133,425)

50,053 49,834 19.1. The amortisation charge for the year has been allocated as follows:


Cost of sales 30 194 12 Administrative expenses 31 7,465 4,170

7,659 4,182 Discontinued operations

Administrative expenses 4,162 744

11,821 4,926


161


20. Investments in associates

Opening balance 3,028,921 3,530,286

Profit for the year

Before taxation 288,552 439,243

Provision for taxation (95,628) (144,355)

192,924 294,888

3,221,845 3,825,174

Other comprehensive income 17,511 (17,511)

Dividends received during the year (259,191) (135,839)

Reversal of Impairment / (impairment)

on investments in associates 38 631,848 (642,903)

Balance as on December 31 20.1 3,612,013 3,028,921

20.1 Investments in equity instruments of associates - Quoted

IGI Insurance Limited

11,838,267 (2011: 11,838,267) fully paid ordinary

shares of Rs. 10 each

Equity held 10.61% (2011: 10.61%)

Market value - Rs. 1,139.788 million (2011: Rs. 523.488 million) 20.1.1 1,104,860 523,488

Tri-Pack Films Limited



Equity held 33.33% (2011: 33.33%)

Market value - Rs. 1,920 million (2011: Rs. 1,603 million) 20.1.2 2,496,271 2,500,822

IGI Investment Bank Limited



Equity held 2.17% (2011: 2.17%)

Market value - Rs. 10.882 million (2011: Rs. 4.150 million) 20.1.1 10,882 4,611

3,612,013 3,028,921

20.1.1 The Group’s investment in IGI Insurance Limited and IGI Investment Bank Limited is less than 20% but they are

considered to be associates as per the requirement of IAS 28 ‘Investments in Associates’ because the Group has

significant influence over the financial and operating policies of these companies through representation on the board

of directors of these companies.

The Group has recognised reversal of impairment losses in IGI Insurance Limited and IGI Investment Bank Limited

during the year of Rs. 616.203 million and Rs. 15.645 million respectively as referred to in note 38.

20.1.2 The Group has assessed the recoverable amount of investment in Tri-Pack Films Limited based on value in use

calculation. This calculation has been made on discounted cash flow methodology for real cash flows using a weighted

average cost of capital of approximately 13%, cumulative annual growth rate of 15.27% in profit before tax till 2020 and

terminal growth of Nil. Based on the above, the recoverable amount of investment in Tri-Pack Films Limited exceeds its

existing carrying amount.

20.2 The Group’s share of the result of its associates, all of which are incorporated in Pakistan, and its share of the assets

(including goodwill) are as follows:

162


21. Other long-term investments

Quoted

Nestle Pakistan Limited

3,649,248 (2011: 3,649,248) fully paid ordinary shares of Rs. 10 each Equity held 8.05% (2011: 8.05%) Market value - Rs. 17,273.095 million (2011: Rs. 13,126.746 million) 21.1 & 21.2 17,273,095 13,126,746 Unquoted

Tetra Pak Pakistan Limited

1,000,000 (2011: 1,000,000) fully paid non-voting shares of Rs. 10 each 21.2 10,000 10,000 Coca-Cola Beverages Pakistan Limited

500,000 (2011: 500,000) fully paid ordinary shares of Rs. 10 each Equity held 0.14% (2011: 0.14%) 4,706 4,706 Pakistan Tourism Development Corporation Limited

2,500 (2011: 2,500) fully paid ordinary shares of Rs. 10 each 25 25 Orient Match Company Limited

1,900 (2011: 1,900) fully paid ordinary shares of Rs. 100 each - -

14,731 14,731 17,287,826 13,141,477

21.1 2,100,000 shares (2011: Nil) of Nestle Pakistan Limited (market value: Rs. 9,939.993 million) are pledged with lenders of

short-term finances facility as referred to in note 15.1.5.

21.2 Nestle Pakistan Limited and Tetra Pak Pakistan Limited are associated undertakings as per the Companies Ordinance,

1984, however, for the purpose of measurement, investments in others have been classified as available for sale as

referred to in note 4.8.

(Rupees in thousand) Percentage

Name interest held Assets Liabilities Revenues Profit/(loss)

December 31, 2012

IGI Insurance Limited 10.61% 1,345,656 240,796 115,314 24,361

Tri-Pack Films Limited 33.33% 5,560,117 3,063,846 3,413,169 177,937

IGI Investment Bank Limited 2.17% 66,647 55,765 346,813 (9,374)

6,972,420 3,360,407 3,875,296 192,924

December 31, 2011

IGI Insurance Limited 10.61% 772,144 248,656 97,544 39,816

Tri-Pack Films Limited 33.33% 3,824,791 1,323,969 3,336,291 260,884

IGI Investment Bank Limited 2.17% 86,938 82,327 17,909 (5,812)

4,683,873 1,654,952 3,451,744 294,888


163


22. Deferred income tax

The asset for deferred taxation comprises temporary

differences relating to:

Accelerated tax depreciation (19,717) -

Provision for accumulating compensated absences 4,423 -

Unused tax losses 242 -

Provision for doubtful debts 800 -

Provision for slow moving items 3,135 -

Provision for doubtful receivables 1,270 -

Exchange difference (1,198) -

Effect of qualifying payment 23,675 -

Provision for unfunded defined benefit plan 1,023 -

13,653 -

23. Long-term loans and deposits

Considered good

Loans to employees 23.1 5,847 4,638

Loan to SNGPL 23.2 82,000 98,400

Security deposits 27,754 25,737

115,601 128,775

Receivable within one year

Loans to employees 27 (1,349) (951)

Security deposits (105) -

Loan to SNGPL 27 (16,400) (16,400)

(17,854) (17,351)

97,747 111,424

23.1 These represent interest free loans to employees for purchase of motor cycles and cycles and are repayable in monthly

installments over a period of 60 to 260 months.

Loans to employees aggregating Rs. 3.481 million (2011: Rs. 2.485 million) are secured by joint registration of motor

cycles in the name of employees and the Group companies. The remaining loans are unsecured.

23.2 This represents an unsecured loan given to Sui Northern Gas Pipelines Limited (SNGPL) for the development of the

infrastructure for the supply of natural gas to the Kasur plant. Mark up is charged at the rate of 1.5% per annum and is

received annually. The remaining amount is receivable in 5 annual installments.


24. Stores and spares

Stores [including in transit Rs. 6.328 million (2011: Rs. 11.444 million)] 268,468 573,728

Spares [including in transit Rs. 6.661 million (2011: Rs. 22.014 million)] 239,053 440,038

507,521 1,013,766

24.1 Stores and spares include items which may result in fixed capital expenditure but are not distinguishable and are net

of an amount of Rs. 1.452 million (2011: Rs. 1.452 million) in respect of provision for slow moving stores and spares.

24.2 During the last year fire at the tissue conversion line and stores damaged certain items of stores and spares. The

carrying value of the assets damaged was Rs. 189.447 million. The Parent Company had claimed such loss from its

insurance providers as referred to in note 35.1.

164


25. Stock-in-trade

Raw materials [including in transit Rs. 271.225 million (2011: Rs. 290.300 million)]. 1,415,026 2,471,356 Work-in-process 336,734 336,271 Finished goods 741,319 2,225,889

2,493,079 5,033,516 Provision for slow moving items (8,956) (4,275)

2,484,123 5,029,241

25.1 Raw materials and finished goods with a cost of Nil (2011: Rs. 783.745 million) and Rs. 27.090 million (2011: Rs. 1,354.412 million) are being valued at net realisable value of Nil (2011: Rs. 653.129 million) and Rs. 23.864 million (2011: Rs. 1,092.969 million) respectively.

25.2 During the last year fire at the tissue conversion line and stores damaged certain items of stock-in-trade. The carrying

value of the assets damaged was Rs. 215.201 million. The Parent Company had claimed such loss from its insurance providers as referred to in note 35.1.


26. Trade debts

Considered good Related parties - unsecured 26.1 27,930 30,858 Others 26.2 2,640,001 2,078,679

2,667,931 2,109,537 Considered doubtful 59,546 45,059

2,727,477 2,154,596 Provision for doubtful debts 26.3 (59,546) (45,059)

2,667,931 2,109,537 26.1 Related parties - unsecured

Associate

Tri-Pack Films Limited 12,121 5,959

Other Related Party

DIC Asia Pacific Pte Ltd 15,809 24,899

27,930 30,858

These are in the normal course of business and are interest free. 26.2 Others include debts of Rs. 264.286 million (2011: Rs. 210.034 million) which are secured by way of bank guarantees

and inland letters of credit.


26.3 The movement in provision during the year is as follows:

Balance as at January 1 45,059 43,540 Provision during the year 32 16,073 8,092 Trade debts written off during the year (1,586) (6,573)

Balance as at December 31 59,546 45,059


165


27. Loans, advances, deposits, prepayments and other receivables

Current portion of loans to employees 23 1,349 951 Current portion of loan receivable from SNGPL 23 16,400 16,400 Advances - considered good To employees 27.1 22,632 13,439 To suppliers 44,109 55,909

66,741 69,348 Due from related parties - unsecured 27.2 344 2,722 Trade deposits - considered good 109,918 101,194 Trade deposits - considered doubtful 1,650 880 Security deposits 114 117 Prepayments 23,709 25,766 Balances with statutory authorities Customs duty 6,937 - Sales tax recoverable 13,970 10,307 Octroi - considered doubtful 1,506 1,506

22,413 11,813 Mark up receivable on Loan to SNGPL 64 77 Term deposits and saving accounts 617 838

681 915 Workers’ profit participation fund 27.3 19 - Insurance claim receivable in respect of assets written off due to fire from IGI Insurance Limited - an associate 89,412 172,791 Other receivables 117,638 66,053 Provision against doubtful receivables (3,630) (2,386)

446,758 466,564 27.1 Included in advances to employees are amounts due from executives of Rs. 6.615 million (2011: Rs. 1.299 million).


27.2 Due from related parties - unsecured

Associates

Tri-Pack Films Limited 63 59 IGI Insurance Limited 281 1,133 Other Related Party

DIC Asia Pacific Pte Ltd - 1,530

344 2,722 These are in the normal course of business and are interest free. 27.3 Workers’ profit participation fund

Opening balance (124) 443 Payments made during the year 7,124 9,000

7,000 9,443 Provision for the year (6,981) (9,567)

Closing balance 19 (124) 28. Income tax receivable

Income tax refundable 1,628,320 947,787 Income tax recoverable 28.1 36,013 36,013

1,664,333 983,800

166

28.1 In 1987, the then Income Tax Officer (ITO) re-opened the Parent Company’s assessments for the accounting years ended December 31, 1983 and 1984 disallowing primarily tax credit given to the Parent Company under section 107 of the Income Tax Ordinance, 1979. The tax credit amounting to Rs. 36.013 million on its capital expenditure for these years was refused on the grounds that such expenditure represented an extension of the Parent Company’s undertaking which did not qualify for tax credit under this section in view of the Parent Company’s location. The assessments for these years were revised by the ITO on these grounds and taxes reassessed were adjusted against certain sales tax refunds and the tax credits previously determined by the ITO and set off against the assessments framed for these years.

The Parent Company had filed an appeal against the revised orders of the ITO before the then Commissioner of Income

Tax (Appeals) [CIT(A)], Karachi. CIT(A) in his order issued in 1988, held the assessments reframed by the ITO for the years 1983 and 1984 presently to be void and of no legal effect. The ITO has filed an appeal against the CIT(A)’s order with the then Income Tax Appellate Tribunal (ITAT). The ITAT has in its order issued in 1996 maintained the order of CIT(A). The assessing officer after the receipt of the appellate order passed by CIT(A), had issued notices under section 65 of the Income Tax Ordinance, 1979 and the Parent Company had filed a writ petition against the aforesaid notices with the High Court of Sindh, the outcome of which is still pending.

The amount recoverable Rs. 36.013 million represents the additional taxes paid as a result of the disallowance of the

tax credits on reframing of the assessments.


29. Cash and bank balances

At banks: On deposit accounts [including USD 7,357 (2011: USD 6,963)] 717 622 On saving accounts [including Nil (2011: USD 29,177)] 29.1 268,347 84,358 On current accounts [including USD 1,125 (2011: USD 5,061)] 29.2 141,384 105,401

410,448 190,381 In hand 6,129 9,939

416,577 200,320 29.1 The balances in saving accounts bear mark up which ranges from 5.0 % to 12.7% per annum. 29.2 Included in these are total restricted funds of Rs. 1.332 million (2011: Rs. 1.332 million) held as payable to TFC holders.

2012 2011

(Rupees in thousand) Note Represented

30. Cost of sales

Materials consumed 9,076,395 8,739,726 Salaries, wages and amenities 30.1 987,176 762,244 Travelling 22,395 24,923 Fuel and power 999,014 819,654 Production supplies 234,040 251,055 Excise duty and sales tax 754 2,213 Rent, rates and taxes 30.2 308,276 346,809 Insurance 28,846 20,660 Repairs and maintenance 360,800 359,354 Packing expenses 89,227 97,618 Depreciation on property, plant and equipment 17.1.3 371,781 337,607 Amortisation of intangible assets 19.1 194 12 Technical fee and royalty 51,769 46,405 Other expenses 30.3 156,576 61,177

12,687,243 11,869,457 Opening work-in-process 329,925 266,387 Closing work-in-process (338,842) (329,925)

Cost of goods produced 12,678,326 11,805,919 Opening stock of finished goods 646,484 729,017 Closing stock of finished goods (853,192) (646,484)

12,471,618 11,888,452


167

Cost of goods produced includes Rs. 1,204.113 million (2011: Rs. 1,175.44 million) for stores and spares consumed, Rs. 36.838 million (2011: Rs. 30.837 million) and Rs. 2.672 million (2011: Nil) for raw material and stores and spares written off respectively.

2012 2011

(Rupees in thousand) Represented



Pension


37,955 16,188 Gratuity

Current service cost 7,188 5,429 Interest cost for the year 13,896 11,247 Expected return on plan assets (14,432) (12,317) Loss on settlement 17,356 - Recognition of loss 1,769 1,089

25,777 5,448 In addition to above, salaries, wages and amenities include Rs. 17.861 million (2011: Rs. 14.555 million) and Rs. 21.870

million (2011: Rs. 5.921 million) in respect of provident fund contribution by the Group and accumulating compensated absences respectively.

30.2 Rent, rates and taxes include operating lease / ujrah rentals amounting to Rs. 303.095 million (2011: Rs. 344.456

million). 30.3 Other expenses include provision for slow moving stores and spares amounting to Nil (2011: Rs. 1.452 million).

2012 2011


31. Administrative expenses

Salaries, wages and amenities 31.1 237,938 197,014 Travelling 22,804 21,517 Rent, rates and taxes 31.2 14,515 8,175 Insurance 5,326 3,460 Printing, stationery and periodicals 16,071 14,680 Electricity 863 587 Postage, telephone and telex 12,938 12,697 Motor vehicles running 13,509 13,382 Computer charges 9,237 8,876 Professional services 31.3 34,085 23,729 Repairs and maintenance 10,592 8,875 Depreciation on property, plant and equipment 17.1.3 21,686 19,282 Amortisation of intangible assets 19.1 7,465 4,170 Depreciation on investment property 18.1 312 328 Security services 2,981 3,172 Advances written off - 5,180 Other expenses 49,957 40,010

460,279 385,134

Administrative expenses include Rs. 56.536 million (2011: Rs. 45.775 million) for stores and spares consumed.

168

2012 2011




Pension Current service cost 3,748 3,980 Interest cost for the year 15,788 14,394 Expected return on plan assets (10,297) (10,914) Contribution made by the employees (2,074) (1,733) Net loss on curtailment / settlement 5,747 - Recognition of loss 2,829 1,478

15,741 7,205 Gratuity


6,661 1,831 In addition to above, salaries, wages and amenities include Rs. 6.182 million (2011: Rs. 5.080 million) and Rs. 6.286

million (2011: Rs. 4.884 million) in respect of provident fund contribution by the Group and accumulating compensated absences respectively.


2012 2011


31.3 Professional services

The charges for professional services include the following in respect of auditors’ services for: Statutory audit 3,460 2,967 Half yearly review 1,150 1,090 Tax services 4,321 6,120 Workers’ profit participation fund audit, management staff pension and gratuity fund audit, audit of consolidated financial statements and other certification charges 903 2,298 Out of pocket expenses 662 667

10,496 13,142 Charges for professional services rendered by the auditors relating to the Discontinued operations amount to


2012 2011


32. Distribution and marketing costs

Salaries, wages and amenities 32.1 146,095 116,774 Travelling 32,947 28,658 Rent, rates and taxes 32.2 9,684 2,431 Freight and distribution 126,960 118,660 Insurance 5,602 997 Electricity 581 391 Postage, telephone and telex 307 334 Advertising 100,577 121,967 Depreciation on property, plant and equipment 17.1.3 7,142 6,244 Repairs and maintenance 55 72 Provision for doubtful debts 26.3 16,073 8,092 Bad debts written off 2,328 (541) Other expenses 43,081 35,857

491,432 439,936


169

Distribution and marketing cost include Rs. 4.042 million (2011: Rs. 5.595 million) for stores and spares consumed. 2012 2011





10,884 4,950 Gratuity


4,605 1,260

In addition to above, salaries, wages and amenities include Rs. 2.816 million (2011: Rs. 2.276 million) and Rs. 4.012 million (2011: Rs. 4.962 million) in respect of provident fund contribution by the Group and accumulating compensated absences respectively.


33. These represent expenses incurred on prospective projects which are not capitalised under International Financial

Reporting Standards.

2012 2011


34. Other operating expenses

Workers’ profit participation fund 6,981 9,124 Workers’ welfare fund 13.4 3,000 3,596 Exchange loss - net 37,129 11,110 Donations 34.1 760 1,892

47,870 25,722

34.1 None of the directors and their spouses had any interest in any of the donees during the year.

170

2012 2011


35. Other operating income

Income from financial assets

Income on bank deposits 10,754 8,809 Interest on loan to SNGPL 1,463 1,709

12,217 10,518 Income from non-financial assets

Management and technical fee 19,168 35,050 Insurance commission from related party 2,405 1,503 Rental income from investment property 20,971 36,810 Profit on disposal of property, plant and equipment 29,981 136,524 Net gain on insurance claim of assets written off due to fire 35.1 150,084 20,884 Scrap sales 9,259 8,272 Provisions and unclaimed balances written back 22,900 14,715 Rebate income 221 3,968 Others 1,942 6,388

256,931 264,114

269,148 274,632

35.1 As referred to in notes 17.1.4, 17.2.1, 24.2 and 25.2, during the last year a fire incident at the tissue conversion line and stores damaged certain items of property, plant and equipment, stores and spares and stock-in-trade. The Parent Company filed the insurance claim in respect of these assets. The insurer had appointed a surveyor who completed his survey during the current year and assessed the insurance claim at Rs. 707.438 million including business interruption claim of Rs. 54.629 million (2011: Nil). Out of the total claim the Parent Company has received proceeds of Rs. 618.026 million (2011: Rs. 373.500 million) from the insurers as of December 31, 2012.

2012 2011


Carrying value of assets written off due to fire

Property, plant and equipment

Buildings on freehold land 17.1 32,867 32,867 Buildings on leasehold land 17.1 6,577 6,577 Plant and machinery 17.1 89,145 89,145 Other equipments (computers, lab equipments and other office equipments) 17.1 538 538 Capital work-in-progress 17.2.1 2,679 2,679

131,806 131,806

Stores and spares 24.2 189,447 189,447 Stock-in-trade 25.2 215,201 215,201

Carrying value of assets written off due to fire 536,454 536,454 Insurance claim verified to date 707,438 557,354

Aggregate gain on insurance claim of assets written off due to fire 170,984 20,900 Gain recognised till previous years 20,900 -

Net gain recognised during the year 150,084 20,900

Continuing operations 150,084 20,884 Discontinued operations - 16

150,084 20,90036. Finance costs

Interest and mark up including commitment charges on :

Long-term finances - secured 1,276 - Finances under mark up arrangements - secured 161,713 127,981 Return on preference shares / convertible stock 412,050 412,050 Loan handling charges 10,732 - Bank charges 3,331 3,579

589,102 543,610


171

2012 2011


37. Investment income

Dividend income 1,223,970 816,709 Gain on sale of short-term investments 13 3,035

1,223,983 819,744

38. Reversal of impairment / (impairment) on investments in associates

Associates - quoted

IGI Insurance Limited 616,203 (616,203) IGI Investment Bank Limited 15,645 (26,700)

631,848 (642,903) This represents reversal of impairment / (impairment) charged on investments based on assessment of recoverable

amount. For quoted associates, the recoverable amount is equal to fair value which has been determined with reference to active market as at balance sheet date.

2012 2011


39. Taxation

Current Current year 119,582 219,437 Prior years (13,644) 38,261

105,938 257,698 Deferred 345,285 1,155,388

451,223 1,413,086 The current tax provision represents the minimum tax on turnover for the year due under Section 113 of the Income

Tax Ordinance, 2001. For the purposes of current taxation, the tax losses available for carry forward as at December 31, 2012 are estimated

approximately at Rs. 4,549.980 million (2011: Rs. 5,180.342 million). Unused tax losses available to the Continuing operations of the Parent Company amount to Rs. 377.609 million (2011: Rs. 377.609 million).

2012 2011 %age % age Represented

39.1 Tax charge reconciliation Numerical reconciliation between the average effective tax rate and the applicable tax rate Applicable tax rate 35.00 35.00 Tax effect of amounts that are: Associates results reported net of tax (17.21) 36.18 Differences in overseas taxation rates (0.60) (0.81) Not deductible for tax purposes 2.44 17.11 Deductible for tax purposes (0.55) (0.77) Exempt for tax purposes (5.29) (5.34) Chargeable to tax at different rates (0.02) 0.43 Tax credits and losses in respect of which no deferred tax asset has been recognised 6.94 26.07 Effect of change in prior years’ tax (0.55) 3.19 Tax effect under presumptive tax regime and others 0.69 17.41

(14.15) 93.47

Average effective tax rate charged to consolidated profit and loss account 20.85 128.47

172

40. Remuneration of Chief Executive, Directors and Executives

40.1 The aggregate amount charged in the financial statements for the year for remuneration, including certain benefits,

to the Chief Executive, full time working Directors including alternate directors and Executives of the Group are as

follows:

Chief Executive Directors Executives

2012 2011 2012 2011 2012 2011

Number of persons 1 1 2 2 110 90


Short-term employee benefits

Managerial remuneration 10,020 8,539 18,767 15,926 152,245 112,983

Housing 3,960 3,337 7,353 6,247 71,594 - 52,127

Utilities 880 742 1,634 1,377 15,995 12,255

Bonus 2,567 2,164 3,959 3,336 49,439 37,287

Leave passage 1,927 1,039 2,111 1,315 5,311 5,161

Medical expenses 2,512 1,867 468 267 638 1,019

Club expenses 60 114 140 229 18 63

Others - - 30 106 26,998 21,376

21,926 17,802 34,462 28,803 322,238 242,271

Post employment benefits

Contribution to provident,

gratuity and pension funds 3,037 2,560 4,486 3,781 37,970 27,916

Other long-term benefits

Accumulating compensated absences 543 475 726 830 9,172 5,379

25,506 20,837 39,674 33,414 369,380 275,566

The Group also provides the Chief Executive and some of the Directors and Executives with free transport and

residential telephones.

40.2 Remuneration to other directors

Aggregate amount charged in the financial statements for the year for fee to 7 directors (2011: 7 directors) is

Rs. 935,000 (2011: Rs. 520,000).


173

41. Transactions with related parties

The related parties comprise associates, directors, key management personnel and post employment benefit

plans. The Group in the normal course of business carries out transactions with various related parties. Amounts

due from and to related parties are shown under receivables and payables, amounts due from directors and

key management personnel are shown under receivables and remuneration of directors and key management

personnel is disclosed in note 40. Other significant transactions with related parties are as follows:


Relationship with the Company Nature of transactions

i. Associates Purchase of goods and services 815,352 766,947


Insurance premium 209,194 151,687

Commission earned 8,779 6,098

Insurance claims received 237,547 408,128


ii. Other related parties Purchase of goods and services 236,344 220,063


Royalty and technical fee - Expense 39,766 41,355

Rebate received - 562

iii. Post employment benefit plans Expense charged in respect of retirement

benefit plans 241,789 117,755

Mark up on temporary loans - 46

All transactions with related parties have been carried out on commercial terms and conditions.

42. Capacity and production Capacity Actual production

2012 2011 2012 2011

Paper and paperboard produced - tons 271,400 316,250 148,055 145,826

Paper and paperboard converted - tons 158,069 159,834 106,322 110,316

Plastics all sorts converted - tons 20,000 20,000 14,494 14,498

Inks produced - tons 7,100 7,100 5,133 5,930

Flexible packaging material - meters ‘000’ 90,000 90,000 47,934 51,572

The variance of actual production from capacity in respect of Paper and paperboard, Plastics and Flexible packaging

material is primarily on account of the product mix. Variance in Inks production is due to market constraints.

43. Rates of exchange

Liabilities in foreign currencies have been translated into PAK Rupees at USD 1.0299 (2011: USD 1.1136), EURO

0.7794 (2011: EURO 0.8604), CHF 0.9409 (2011: CHF 1.0481), SEK 6.6979 (2011: SEK 7.6864), GBP 0.6373 (2011:

GBP 0.7225), Nil (2011: SGD 1.4486), Nil (2011: CAD 1.1368), YEN 88.5269 (2011: YEN 86.334) and SLR 130.7702

(2011: SLR 127.3561) equal to Rs. 100. Assets in foreign currencies have been translated into PAK Rupees at USD

1.0320 (2011: USD 1.1161) ,EURO 0.7809 (2011: EURO 0.8624), GBP 0.6387 (2011: Nil) and SLR 130.7702 (2011:

SLR 127.3561) equal to Rs. 100.

174

2012 2011


44. Cash generated from / (used in) operations

Loss before tax including Discontinued operations (3,276,503) (1,252,984) Adjustments for: Loss recognised on the re-measurement of assets of disposal group 15.2 4,618,688 - Depreciation on property, plant and equipment 17.1.3 1,298,528 1,657,404 Depreciation on investment property 18 312 328 Amortisation on intangible assets 19.1 11,821 4,926 Reversal of impairment / (impairment) on investments in associates 38 (631,848) 642,903 Provision for accumulating compensated absences and staff gratuity 54,761 26,680 Provision for retirement benefits 198,404 80,280 Provision for doubtful debts 26.3 16,073 8,092 Exchange adjustments (8,189) 3,796 Net profit on disposal of property, plant and equipment (24,110) (167,525) Net gain on insurance claim of assets written off due to fire 35.1 (150,084) (20,900) Finance costs 1,566,606 1,545,271 Gain on sale of short-term investments 37 (13) (3,035) Dividend income 37 (1,223,970) (816,709) Share of profit of associates 20 (288,552) (439,243)

Profit before working capital changes 2,161,924 1,269,284 Effect on cash flow due to working capital changes Increase in stores and spares (188,908) (123,032) Increase in stock-in-trade (881,184) (1,081,039) Increase in trade debts (574,467) (170,313) Increase in loans, advances, deposits, prepayments and other receivables (63,573) (11,157) Increase / (decrease) in trade and other payables 188,998 (364,165)

(1,519,134) (1,749,706)

642,790 (480,422)

45. Cash and cash equivalents

Cash and bank balances 29 416,577 200,320 Finances under mark up arrangements - secured 11 (1,251,463) (1,170,227) Short-term finances - secured 15.1 (5,100,000) -

(5,934,886) (969,907)

46. Combined earnings / (loss) per share

46.1 Combined basic earnings / (loss) per share - Continuing operations

Profit / (loss) for the year from Continuing operations attributable to equity holders of the Parent Company Rupees in thousand 2,018,269 (406,083) Weighted average number of ordinary shares Numbers 84,379,504 84,379,504

Earnings / (loss) per share Rupees 23.92 (4.81)

46.2 Combined basic loss per share - Discontinued operations

Loss for the year from Discontinued operations Rupees in thousand (4,014,886) (1,681,075) Weighted average number of ordinary shares Numbers 84,379,504 84,379,504

Loss per share Rupees (47.58) (19.93)


175

2012 2011


46.3 Combined diluted earnings / (loss) per share - Continuing operations

Profit / (loss) for the year from Continuing operations attributable to equity holders of the Parent Company Rupees in thousand 2,018,269 (406,083) Return on preference shares / convertible stock - net of tax Rupees in thousand 324,421 325,002

2,342,690 (81,081)

Weighted average number of ordinary shares Numbers 84,379,504 84,379,504 Weighted average number of notionally converted preference shares / convertible stock Numbers 21,686,842 21,686,842

106,066,346 106,066,346

Combined diluted earnings / (loss) per share Rupees 22.09 (0.76)

In respect of Continuing operations, combined diluted EPS is restricted to the basic EPS in cases where effect of

the conversion of preference shares / convertible stock is anti-dilutive.

46.4 Combined diluted loss per share - Discontuned operations.

The combined diluted loss per share of Discontinued operations is the same as the basic loss per share of

Discontinued operations as there are no convertible instruments attributable to the Discontinued operations.

47. Segment Information

A Business segment is a group of assets and operations engaged in providing products that are subject to risk and

returns that are different from those of other business segments.

Types of Segments Nature of business


Packaging Manufacture and market packing products

Consumer Products Division Manufacture and market consumer / tissue products

Ink Manufacture and market industrial and commercial ink products

General & Others Workshop and other general business

Discontinued operations

Paper & Board Division Manufacture and market paper and corrugated boxes

176

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177

2012 2011


47.1 Reconciliation of segment profit / (loss)

Total profit for reportable segments 2,688,030 1,037,405 Income from associates 29,361 303,404 Intercompany adjustment (94,547) (128,470)

Profit before tax 2,622,844 1,212,339 47.2 Reconciliation of reportable segment assets

Total assets for reportable segments 24,446,376 27,004,997 Intersegment assets 20,069 (201,517) Other corporate assets 23,387,231 18,111,296

Total assets 47,853,676 44,914,776 47.3 Reconciliation of segment taxation

Total tax expense for reportable segments 897,223 965,086 Intercompany consolidation adjustments Group (446,000) 448,000 Associates 95,628 144,355 Taxation as per consolidated profit and loss account

546,851 1,557,441

47.4 Reconciliation of segment loss after tax

Total profit after tax for reportable segments 1,790,807 72,319 Intercompany adjustment for profit before tax (65,186) 174,934 Intercompany adjustment for taxation 350,372 (592,355)

Profit / (loss) as per consolidated profit and loss account 2,075,993 (345,102)

47.5 Information by geographical area Revenue Non - current assets


Afghanistan 63,220 64,020 - -

Bangladesh 18,700 8,368 - -

Pakistan 13,072,453 12,467,328 14,136,422 18,644,343

Singapore 78,728 24,791 - -

Srilanka 1,036,513 1,095,738 456,055 207,508

14,269,614 13,660,245 14,592,477 18,851,851

Sales are allocated to geographical areas according to the location of the country producing the goods or providing

services. 47.6 Information about major customers

Included in the total revenue is revenue from two (2011: three) customers of the Group from the packaging (2011: packaging) segments which represent approximately Rs. 5,801.113 million (2011: Rs. 8,118.60 million) of the Group’s total revenue.

48. Financial risk management

48.1 Financial risk factors

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk, fair value interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk. The Group’s overall risk management programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the Group’s financial performance. The Group uses derivative financial instruments to hedge certain risk exposures.

178

Risk management is carried out by the Group’s finance department under policies approved by the board of directors. The Group’s finance department evaluates and hedges financial risks. The board provides written principles for overall risk management, as well as written policies covering specific areas, such as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial instruments, and investment of excess liquidity.

(a) Market risk

(i) Foreign exchange risk

Foreign exchange risk is the risk that the fair value of future cash flows of a financial instrument shall fluctuate because of changes in foreign exchange rates.

The Group operates internationally and is exposed to foreign exchange risk arising from various currency

exposures, primarily with respect to the US dollar and the Euro. Foreign exchange risk arises from future commercial transactions and recognised assets and liabilities and net investments in foreign operations.

At December 31, 2012, if the Rupee had weakened / strengthened by 10% against the US dollar with all other

variables held constant, post-tax loss for the year would have been Rs. 10.196 million higher / lower (2011: Rs. 15.210 million higher / lower) mainly as a result of foreign exchange losses / gains on translation of US dollar-denominated financial assets and liabilities.

At December 31, 2012, if the Rupee had weakened / strengthened by 10% against the Euro with all other variables

held constant, post-tax loss for the year would have been Rs. 10.098 million (2011: Rs. 6.293 million) higher / lower, mainly as a result of foreign exchange losses / gains on translation of Euro-denominated financial assets and liabilities.

At December 31, 2012, if the Rupee had weakened / strengthened by 10% against the Sri Lankan rupee with all

other variables held constant, other component of equity would have been Rs. 49.588 million (2011: Rs. 44.583 million) higher / lower, mainly as a result of foreign exchange gains / losses on translation of net assets of Packages Lanka (Private) Limited, denominated in Sri Lankan Rupee.

(ii) Price risk

The Group is exposed to equity securities price risk because of investments held by the Group and classified as available for sale. The Group is not exposed to commodity price risk. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with the limits set by the board of directors.

The Group’s investments in equity of other entities that are publicly traded are included in all of the following

three stock exchanges, Karachi Stock Exchange, Lahore Stock Exchange and Islamabad Stock Exchange. The table below summarises the impact of increases / decreases of the KSE-100 index on the Group’s post-tax

profit for the year and on equity. The analysis is based on the assumption that the KSE had increased / decreased by 10% with all other variables held constant and all the Group’s equity instruments moved according to the historical correlation with the index:

Impact on post-tax profit Impact on other components of equity


Karachi Stock Exchange - - 1,520,032 643,211

Post-tax profit for the year would increase / decrease as a result of gains / losses on equity securities classified

as at fair value through profit or loss. Other components of equity would increase / decrease as a result of gains / losses on equity securities classified as available for sale.


179

(iii) Cash flow and fair value interest rate risk

As the Group has no significant floating interest rate assets, the Group’s income is substantially independent of changes in market interest rates.

The Group’s interest rate risk arises from short-term and long-term borrowings. These borrowings issued at

variable rates expose the Group to cash flow interest rate risk. The Group analyses its interest rate exposure on a dynamic basis. Various scenarios are simulated taking into

consideration refinancing, renewal of existing positions, alternative financing and hedging. Based on these scenarios, the Group calculates the impact on profit and loss of a defined interest rate shift. The scenarios are run only for liabilities that represent the major interest-bearing positions.

At December 31, 2012, if interest rates on floating rate borrowings had been 1% higher / lower with all other

variables held constant, post-tax loss for the year would have been Rs. 72.195 million (2011: Rs. 68.223 million) higher / lower, mainly as a result of higher / lower interest expense on floating rate borrowings.

(b) Credit risk

Credit risk represents the risk of financial loss being caused if counter party fails to discharge an obligation. Credit risk of the Group arises from cash and cash equivalents, derivative financial instruments and deposits with

banks and financial institutions, as well as credit exposures to distributors and wholesale and retail customers, including outstanding receivables and committed transactions. The management assesses the credit quality of the customers, taking into account their financial position, past experience and other factors. Individual risk limits are set based on internal or external ratings in accordance with limits set by the board. The utilisation of credit limits is regularly monitored and major sales to retail customers are settled in cash. For banks and financial institutions, only independently rated parties with a strong credit rating are accepted.

The Group monitors the credit quality of its financial assets with reference to historical performance of such

assets and available external credit ratings. The carrying values of financial assets exposed to credit risk and

which are neither past due nor impaired are as under:


Long-term loans and deposits 97,747 111,424 Trade debts 1,672,462 1,433,613 Loans, advances, deposits, prepayments and other receivables 446,758 466,564 Balances with banks 410,448 190,381

2,627,415 2,201,982

As of December 31, 2012, trade receivables of Rs. 995.469 million (2011: Rs. 675.924 million) were past due but

not impaired. These relate to a number of independent customers for whom there is no recent history of default.

The aging analysis of these trade receivables is as follows:

Rupees in thousand) 2012 2011

Up to 90 days 868,868 634,405 90 to 180 days 70,358 20,015 181 to 365 days 56,243 21,504

995,469 675,924

The management estimates the recoverability of trade receivables on the basis of financial position and past

history of its customers based on the objective evidence that it shall not receive the amount due from the particular customer. The provision is written off by the Group when it expects that it cannot recover the balance due. Any subsequent repayments in relation to amount written off, are credited directly to profit and loss account.

180

The credit quality of Group’s bank balances can be assessed with reference to external credit ratings as follows:

Rating Rating Rating (Rupees in thousand) Short-term Long-term Agency 2012 2011

Bank Alfalah Limited A1+ AA PACRA 10 10

Bank Al-Habib Limited A1+ AA+ PACRA 4 4

BankIslami Pakistan Limited A1 A PACRA 10 2,675

Barclays Bank PLC, Pakistan A-1 A+ S & P 254 14,693

Citibank N.A. P-1 A1 Moody’s 792 1

Commercial Bank Limited Sri Lanka AA Fitch - 8

Deutsche Bank A.G. A-1 A+ S & P - 10,576

Dubai Islamic Bank Pakistan Limited A-1 A JCR-VIS 551 50

Faysal Bank Limited A1+ AA PACRA 229 723

Habib Bank Limited A-1+ AA+ JCR-VIS 1,381 619

Hatton Bank Limited Sri Lanka AA- Fitch - 1,210

HSBC Bank Middle East Limited P-1 A1 Moody’s 10,570 56

JS Bank Limited A1 A+ PACRA 51 2,730

MCB Bank Limited A1+ AA+ PACRA 968 628

MCB Bank Limited Sri Lanka A1+ AA+ PACRA 30,531 11,757

Meezan Bank Limited A-1+ AA- JCR-VIS 1,724 949

National Bank of Pakistan A-1+ AAA JCR-VIS 112,922 36,875

NDB Bank PLC AA- Fitch 717 655

NIB Bank Limited A1+ AA- PACRA 173,711 27,601

Samba Bank Limited A-1 AA- JCR-VIS 14,857 2,392

Silk Bank Limited A-2 A- JCR-VIS 2 2

Soneri Bank Limited A1+ AA- PACRA 38 14

Standard Chartered Bank (Pakistan) Limited A1+ AAA PACRA 60,809 74,236

Standard Chartered Bank Sri Lanka AAA Fitch - 827

The Bank of Punjab A1+ AA- PACRA 316 9

The Bank of Tokyo-Mitsubishi UFJ, Limited A-1 A+ S & P - 527

United Bank Limited A-1+ AA+ JCR-VIS 1 554

410,448 190,381

(c) Liquidity risk

Liquidity risk represents the risk that the Group shall encounter difficulties in meeting obligations associated with financial liabilities.

Prudent liquidity risk management implies maintaining sufficient cash and marketable securities, the availability

of funding through an adequate amount of committed credit facilities. Due to the dynamic nature of the Group’s businesses, the Group’s finance department maintains flexibility in funding by maintaining availability under committed credit lines.

Management monitors the forecasts of the Group’s cash and cash equivalents (note 45) on the basis of expected cash flow. This is generally carried out in accordance with practice and limits set by the Group. These limits vary by location to take into account the liquidity of the market in which the entity operates. In addition, the Group’s liquidity management policy involves projecting cash flows in each quarter and considering the level of liquid assets necessary to meet its liabilities, monitoring balance sheet liquidity ratios against internal and external regulatory requirements and maintaining debt financing plans.


181

The table below analyses the Group’s financial liabilities and net-settled derivative financial liabilities into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows as the impact of discounting is

not significant.



Long-term finances 1,000,000 - 857,130 1,359,513

Short-term finances - secured 5,100,000 - - -

Finances under mark

up arrangements - secured 1,251,463 - - -



10,074,539 - 857,130 1,359,513



Long-term finances - secured 380,952 1,233,333 4,292,857 578,572

Finances under mark

up arrangements - secured 1,170,227 - - -



3,925,147 1,233,333 4,292,857 578,572

48.2 Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern

in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal

capital structure to reduce the cost of capital.

The Group manages its capital structure and makes adjustments to it in the light of changes in economic

conditions. In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends

paid to shareholders or issue new shares.

Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. During 2012,

the Group’s strategy was to maintain the gearing ratio below 60% and a AA credit rating. The gearing ratios at

December 31, 2012 and 2011 were as follows:

Rupees in thousand) 2012 2011

Long-term finances 4,687,220 8,575,339 Total equity 31,636,638 29,575,285 Total capital 36,323,858 38,150,624

Gearing ratio 13% 22%

48.3 Fair value estimation

The fair value of financial instruments traded in active markets is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group are the current bid prices.

182

The financial instruments that are not traded in active market are carried at cost and are tested for impairment

according to IAS 39. The fair value of interest rate swaps is calculated as the present value of the estimated future

cash flows.

The carrying amount less impairment provision of trade receivables and payables are assumed to approximate

their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the

future contractual cash flows at the current market interest rate that is available to the Group for similar financial

instruments.

49. Detail of subsidiaries

Accounting Percentage Country of

Name of the subsidiaries year end of holding incorporation

Packages Lanka (Private) Limited December 31, 2012 79.07% Sri Lanka

DIC Pakistan Limited December 31, 2012 54.98% Pakistan

Packages Construction (Private) Limited December 31, 2012 99.99% Pakistan

Bulleh Shah Packaging (Private) Limited December 31, 2012 100% Pakistan

[formerly Bulleh Shah Paper Mill (Private) Limited]

50. Date of authorisation for issue

These financial statements were authorised for issue on March 18, 2013 by the Board of Directors of the Parent

Company.

51. Non-Adjusting events after the balance sheet date

The Board of Directors of the Parent Company have proposed a final cash dividend for the year ended December

31, 2012 of Rs. 4.50 per share (2011: Rs. 1.50 per share), amounting to Rs. 379.708 million (2011: Rs. 126.569

million) at their meeting held on March 18, 2013 for approval of the members at the Annual General Meeting to

be held on April 30, 2013. The board has also recommended to transfer Rs. 3,100 million (2011: Rs. 1,250 million)

to accumulated profit / (loss) from general reserves.

52. Corresponding figures

Corresponding figures have been re-arranged and re-classified, wherever necessary, for the purposes of

comparison. However, no significant re-classifications have been made except for representing the results of

Discontinued operations in accordance with IFRS 5.



183

Form of Proxy58th Annual General Meeting

I/We

of being a member of Packages Limited and

holder of Ordinary Shares as per Shares Register Folio No. (Number of Shares)

and / or CDC Participant I.D. No. and Sub Account No.

here by appoint of or failing him / her

of or failing him / her of as my proxy to vote for me and

on my behalf at the Annual General Meeting of the Company to be held on Tuesday, April 30, 2013 at 11:00 a.m. at Beach

Luxury Hotel, Moulvi Tamizuddin Khan Road, Karachi and at any adjournment thereof.

Signed this day of 2013.

WITNESSES:

1. Signature :

Name :

Address :

CNIC or

Passport No.

2. Signature :

Name :

Address :

CNIC or

Passport No.

Note : Proxies, in order to be effective, must be received by the Company not less than 48 hours before the meeting. A proxy need not to be a member of the Company.

CDC Shareholders and their Proxies are requested to attach an attested photocopy of their Computerised National Identity Card or Passport with this proxy form before submission to the Company.

Signature

(Signature should agree withthe specimen signature

registered with the Company)

Please af f ix.

Rupees five

revenue stamp

184

AFFIX

CORRECT

POSTAGE

The Company Secretary

PACKAGES LIMITED4th Floor, The ForumSuite # 416 - 422G-20, Block 9, Khayaban-e-Jami,Clifton, Karachi - 75600

www.packages.com.pk

Head OfficeShahrah-e-Roomi, P.O. Amer Sidhu,Lahore - 54760, Pakistan.Tel: (042) 35811541-46, (042) 35811191-94Fax: (042) 35811195, (042) 35820147

Printed on paper produced at Designed & Printed by www.vantagepakistan.com

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